Bank regulation
Bank regulation is the action of the State to set standards by which his role is defined in the banking sector, ie in particular rules on the monitoring of credit institutions. The terms of banking supervision and regulation are not sharply separated from each other and are sometimes used as synonyms. Here under banking regulation we mean the set of general rules, while banking supervision referred enforcing this. Objective of banking regulation is usually the stability of the financial system to reinforce, but it can also provide social and industrial policy motives. The banking system is one in the developed countries to the most regulated market sectors of an economy.
General
A market economy -oriented economic system is mainly characterized by the principles of decision-making and freedom of contract on the one hand and self-responsibility on the other. With the autonomy to be able to make their own economic decisions itself, goes hand in hand, the obligation to be responsible for the consequences of your own decisions. One aspect of this contractual freedom is the freedom of trade, ie the freedom to commercial businesses (like banks) operate without special state requirements. Therefore, large parts of western economies without special government monitoring may be commercially active in the markets. Still, the Industrial Code of 1869 threw a few commercial activities of a particular ( trade police ) control; the Bank doing business as such in any case had benefited from an unrestricted freedom of trade.
Reasons for banking regulation
Severe economic crises like those of 1837, 1857, or the world economic crisis, which more or less are highly sensitive to spread on the financial markets, showed that governments may lead to market failure. Explanations for this observation are searched in the database theory. Same time, since the functioning of modern economies is simply inconceivable without credit institutions had a way be found to ensure the functioning of the credit system. Therefore, it was adopted in Germany as a result of the German banking crisis in 1931, the first German Banking Act in January 1934.
From the regulatory perspective, there for supervision of credit institutions by state institutions following reasons:
- Investor protection
- Accounting and disclosure rules
- General Payments
Levels of regulation of banking regulation
In Germany, Austria and Switzerland, the banking regulation is dual organized. On the one hand, the legislature has enacted bank-specific laws, the nature and extent of banking quotas on the other hand, compliance with these laws is monitored by state institutions.
Laws and Regulations
A variety of laws and regulations that apply only in the relationship between banks and banking supervisory accesses, a detail in the banking system. In Germany these are particularly
- The German Banking Act (KWG )
- The Solvency ( Solvency )
- The Minimum Requirements for Risk Management ( MaRisk )
- The large exposures and credit regulation ( GroMiKV )
- The Pfandbrief Act ( PfBG )
- Or the Depository Act ( DepG ).
Bank supervision ( prudential supervision )
The Bank is supervised in Germany by the German Bundesbank and the Federal Financial Supervisory Authority ( BaFin). German Federal Bank ( organized as a state corporation under public law ) and BaFin ( organized as a state institution under public law ) share the tasks of banking supervision. The collaboration between the two is governed by § 7 of the Banking Act. After that, the German Federal Bank considers as part of ongoing supervision, among others from institutes in regular reports to be submitted and messages and checks whether the capital adequacy and risk management procedures of the Institute are appropriate. BaFin has, in consultation with the Deutsche Bundesbank Council directive implementing quality assurance and the ongoing monitoring of credit and financial services institutions by the German Bundesbank adopted ( supervision policy ).
In Austria, the Austrian Financial Market Authority (FMA ) is responsible. The Austrian Banking Supervision heard performing the official duties and powers that the Banking Act (BWG), the Savings Bank Act ( DDA), the Building Societies Act ( BSpG ), the introduction of regulation on the mortgage bank and the Pfandbrief Act, the Mortgage Bank Act, Mortgage Act, the Law on the protection of the rights are regulated by the owner of Pfandbriefe in Bank Bonds Act, the depository Act, and the E -Money Act and the regulations pertaining thereto and assigned to the FMA.
All banks operating in Switzerland must be licensed by the Swiss Financial Market Supervisory Authority FINMA. FINMA, which belongs to the Basel Committee on Banking Supervision, regulates and supervises all banks in Switzerland in accordance with the standards of the Basel Committee on Banking Supervision. These standards cover not only on the capital adequacy and capital adequacy of banks, but also to be complied with the prudential and behavioral rules. As an additional safety measure, Swiss law even defines higher capital requirements than the " Basel Capital Accord ".
On 1 January 2011, the European Banking Authority was created in addition to the national supervisory authorities.
Objectives of bank regulation
" BaFin carries out its duties and powers only in the public interest " (§ 4 para 4 FinDAG ). In this principle on the one hand is the regulatory idea expressed that there is no general state liability on depositors, on the other hand, the alignment is only in the public interest an expression of the idea that is not the direct protection of depositors, but the correct functional defects of the banking market is a national task.
The main objectives of banking supervision are summarized in § 6 of the Banking Act. The banking regulation should then counteract abuses in the credit system, the
- The safety of the assets entrusted to institutions endanger
- Impair the orderly conduct of banking transactions or
- Can result in significant disadvantages for the economy as a whole is.
The Banking Act gives the financial institution before rules that have to be observed both in the creation and on the operation of their businesses. These rules are designed to prevent slippage, which could interfere with the proper functioning of the banking system. How intense banks are supervised, depends on the nature and extent of any transactions which they operate. Supervision is governed basically their main attention to the fact that banks hold sufficient capital and liquidity and adequate risk control mechanisms have installed.
The banking regulation can ( and should ) do not help in all cases prevent insolvency. Preventive care § 46, § 46a and § 46b KWG emerging crisis for intervention options of banking supervision.
Criticism
The hardly widespread idea that one can dispense with banking regulation, is discussed under the heading of free banking. Even under the laissez-faire advocates, only a minority for the realization of a free banking.