Emmanuel Dooseman Partner - New York
Mazars banking newsletter / N°14
Depending on the countries and currency areas concerned, central banks may be asked to fight inflation (and sometimes unemployment) and to encourage growth, but they are also required to monitor the resilience of the banking system through the supervision and control of solvency and liquidity. They therefore have the dual responsibility of implementing monetary policy and of supervising banking systems.
Since the second half of 2007 they have been very active on both fronts. They have conducted expansionary monetary policies, described today as ‘non-standard’policies, but have also been engaged in a comprehensive revision of the rules for banking regulation and oversight. Central banks play a more essential role than ever in a lacklustre economic landscape where fiscal policies are under constraint.
The choices they make and implement today will determine the development of our financial systems. The adjustments introduced by the Basel Committee and national and international regulators in Africa, Asia, America and Europe, the avalanche of regulation, the introduction of new ratios (liquidity, TLAC) and the enhancement of other indicators (solvency, leverage) are bringing about radical change in our banking systems. These measures are fostering the emergence of new players engaging in the activities abandoned by the banks who now find them prohibited, or too costly.
The desire to prevent, or more realistically to curtail, the risk of bank failures and to restore the confidence of economic actors is having a profound long-term impact on the business model of banks. But in doing so, these regulatory developments are also changing the supervisory practices of central banks, as is the impact of injections of liquidity, the central bankers’ essential tool for monetary policy.
These developments pose challenges to regulators, supervisory authorities and the banking sector against a background of historically weak rates that call intoquestion our practices and paradigms.
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