Cross-Border Banking: Regulatory Challenges by Gerard Caprio Jr, Douglas D Evanoff, George G Kaufman

By Gerard Caprio Jr, Douglas D Evanoff, George G Kaufman

Cross-border banking, whereas having the potential of a extra effective monetary region, additionally creates power demanding situations for financial institution supervisors and regulators. It calls for cooperation via regulatory specialists throughout jurisdictions and a transparent delineation of authority and accountability. That delineation is sometimes no longer current and regulatory experts usually have considerably various incentives to reply while cross-border-active banks come across problems. every one of these concerns have in basic terms all started to be heavily evaluated. This quantity, one of many first makes an attempt to handle those matters, brings jointly specialists and regulators from various nations. the big variety of subject matters mentioned comprise: the present panorama of cross-border financial institution job, the ensuing aggressive implications, rising demanding situations for prudential legislation, safeguard internet matters, failure solution concerns, and the capability destiny evolution of foreign banking.

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Tax issues can also have a major impact on how certain parts of a bank's operations are structured from a legal and business perspective. The good news is that the number of significant subsidiaries is not large for many of the large internationally active banking groups. The bad news is that even previously insignificant operations can create costly surprises. 2. The changing nature of risk and risk management I also believe that the relative importance of risks may be changing. I emphasize the word relative.

Neither of these extremes will work, in my view. I am encouraging home-country supervisors to pay particular attention to the information needs of host-country supervisors especially in situations where the bank is systemically important in the host market. Similarly, I am encouraging host countries to focus on what they really need from the home country or the bank about group-wide operations in order to increase reliance and do their job. They may not need everything. 4. Some Next Steps re: Basel II Home-Host Cooperation In this regard, the BCBS, in association with the Core Principles Liaison Group (CPLG), a BCBS working group which includes representatives from sixteen non G-10 jurisdictions, is in the process of finalizing a further paper addressing the question of information-sharing between home and host supervisors under Basel II.

Cross-Border Banking and the Challenges 17 country where most of its important banks are subsidiaries of foreign banks, you would like to have the right incentives in place to entice local bank managers to look after the interests of the subsidiaries under their management and not exclusively those of the individual shareholders. There are some measures that would be useful to address these challenges. One, which I have already proposed, is to require large local banks to list a percentage of their equity, say 25 percent, on local stock markets.

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