In this Article, I argue that there are significant gaps in the federal system for resolving financial distress in a financial firm even after passage of the Dodd-Frank bill. These gaps represent potential sources of systemic risk—that is, risk to the financial system as a whole. They must be fixed. But I should make clear at the outset that I do not argue that these gaps must be filled with the Bankruptcy Code. Rather, the point is that the various systems for resolving financial distress among financial firms must be integrated so that the result of financial distress is clear and predictable. Integrating all under the Bankruptcy Code is an option, but not the only way to achieve such clarity. The first Part of this Article sketches the several existing systems for resolving financial distress in financial firms, including the new resolution authority created by the Dodd-Frank Act. By my count, there are at least six systems at work here, not counting state-by-state variations. Part II examines the coverage of these systems and the uncertainty created by the interaction of the same. For example, under current law, a large hedge fund might be "resolved" under chapter 11 of the Bankruptcy Code, or it might not be. The decision rests with the systemic risk counsel. Therefore, the fund's counterparties will be unable to determine ahead of time which set of rules is incorporated into their contracts with the hedge fund. Undoubtedly, both will be priced with a further discount for the uncertainty. That is unlikely to be the optimal solution. Part III of the Article then considers the ways in which the divide between finance and bankruptcy could be narrowed, if not eliminated. Ultimately, I doubt the plausibility of solving these issues with some grand solution like drafting a unified bankruptcy law. The political realities involved in getting a major piece of legislation through Congress are so daunting nowadays that it is something of a wonder that even Dodd-Frank, with all its limitations, passed. A unified system ...
Recession is one of the challenges to financial institutions. Economic growth is the causality and many firms disappear. Capital is lost and management skills are questioned. Efforts are always visible to the wisdom of management but how these efforts turn to be futile it is mystery. Man is competent each time from failure but the economy struggles always. Many governments disappear and there is political instability. There are several management and political decisions which are contributing to institutional failures. Reasons are many including natural calamities. It directly affects financial institutions. Financial institutions should survive or perish. Mechanism has to be reinvented suitably.
This study investigates the whistleblowing environment in Indonesian financial institutions from Indonesian employees perspective. Using primary data extracted from questionnaires this study to address two issues: investigate and explore the factor that encourages and discourages Indonesian employees to whistleblower in the Indonesian financial industry; and investigate and explore the Indonesian financial companys environment that affects whistleblowing activity. Results were consistent with previous research by Martens and Kelleher (2004), Curtis (2006), Hwang, Staley, Chen and Lan (2008), Dandekar (1991) and Worth (2013) in their relative domains. The Indonesian employees and financial institutions are less influenced by confusion culture (guanxi) which provides some variations in findings from prior research. Generally in Indonesia Financial Institutions there is a positive sign towards whistleblowing activity, where companies create a positive environment to support the activity although more could be done by government to regulate and enforce compliance to encourage trust in protecting employees when whistleblowing.
On 29th - 30th March 2007, SUERF and the Central Bank of Cyprus jointly organized a Seminar: Corporate Governance in Financial Institutions. The papers in the present publication are based on a sample of the presentations at the Seminar. Together, the papers illuminate a number of key issues in corporate governance in a variety of financial firms. In the first paper based on a keynote address, Spyros G. Stavrinakis, Central Bank of Cyprus gives an overview of the legal framework for corporate governance in financial institutions in Cyprus. According to a Central BankDirective issued in 2006, implementation of corporate governance principles is mandatory for all banks incorporated in Cyprus and their overseas branches and for some Cyprus branches of foreign banks domiciled outside the European Economic Area. Banks are obliged to have a robust internal governance framework, consistent lines of reporting and effective risk identification, management, monitoring and reporting procedures for all the risks to which credit institutions are actually or potentially exposed. The board of directors should take the lead in establishing and approving ethical standards and corporate values for itself and for the bank's senior executive management. Potential conflicts of interest should be identified, prevented or appropriately managed. Each bank should maintain a compliance function that monitors compliance with rules, regulations and policies. Clear lines of responsibility and accountability should be set and enforced. New members of the board of directors as well as the senior executive managers of banks have to be vetted and approved by the Central Bank of Cyprus for their " fitness and properness." In order to ensure transparency concerning the implementation of the principles, each bank's corporate governance framework should be disclosed in the bank's annual report and on its public website. In the second paper by Christian Harm, University of Muenster, "The Governance of the Banking Firm" the author builds on the literatures on corporate governance and financial regulation. In relation to governance of financial institutions, agency theory has both merits and shortcomings. It provides good explanations in many delegation situations but it has severe difficulties in dealing with institutions with several stakeholders and complex objective functions for the management. Firms guided by shareholder value may work more effectively than firms guided by stakeholder cacophony. Depositors are important stakeholders in banks. Since they are typically incapable of managing the supervision of their claims on the bank, they rely on regulators to do it for them. Remuneration systems for bank managers should provide proper incentives. According to the author, incentives should be structured such as to reward particular strategic achievements. Banks can apply executive stock option plans, but should confine options to a secondary place behind other long-term incentives based on success criteria that further shareholder interests without compromising the regulatory mission. Such an incentive framework tends, however, to be very complex so that the general ambiguities associated with the concept of governance could imply that in the banking firm, selecting managers with a proper intrinsic motivation may be superior to defining complex remuneration programs. In the third paper "Corporate Governance Issues in Non-Shareholder Value Financial Institutions: ACase Study of Mutual Building Societies in the UK", David T. Llewellyn, Loughborough University, focuses on corporate governance in non-incorporated financial firms. The author describes the relevant stakeholders and the nature of agency problems in different types of financial firms. He compares monitoring mechanisms, incentives, abilities and feasibilities of managers and members of mutuals. Mutuality raises specific corporate governance issues: Corporate governance is less clearly defined because the firm's objectives are less clearly defined. Conflicts of interest between managers and owners are less easily identified and it is more difficult to create management incentives. The almost exclusive source of capital is retained profits and each member has a non-exclusive and non-marketable claim to residual net worth. Voting rights are typically not proportional to the size of the ownership stake. There is no market in ownership claims and therefore no effective market in corporate control. Consequently, there is ample scope for mutuals to be inefficient. There is, however, no evidence that the efficiency and performance of mutuals are poorer that that of incorporated financial firms. In the fourth paper "Corporate Governance in Emerging Market Banks", Bridget Gandy, Fitch Ratings Ltd., and her co-authors from the rating agency look at the framework for corporate governance of banks in a sample of emerging market countries. Since the crisis in the late 1990s in Latin America and Asia, there has been a marked improvement in corporate governance of financial institutions in the regions under observation. Many countries have taken legal steps to develop functioning market economies with a view to the need to satisfy the demands of international capital markets. Several banks have listed their shares on stock exchanges in developed markets and foreign bank ownership and involvement in local banking systems have increased. In Central and Eastern Europe, countries' desire for EU-accession has impacted on the development of their corporate governance systems. At the individual bank level, Fitch Ratings looks at bank board independence and quality, oversight and the importance of related party transactions, the integrity of the audit process, acceptability of executive and director remuneration, ownership structures and transparency. In evaluating the quality of governance at the country level, the authors apply a three-pillar approach in line with Montesquieu: Powers and responsibilities need to be separated between a representative legislature, a competent and accountable executive branch and a fair and independent judiciary. The paper contains an interesting table in which a number of key regulatory initiatives in a sample of emerging market countries are compared. The authors point out that large scale privatizations have reduced the importance of state-owned banks in many countries. There are, however, still several examples with complex holding structures involving banks with potential negative implications for corporate governance quality and problems with related party transactions. Acquisitions by foreign banks with developed corporate governance standards have generally had a positive impact and also listing of bank shares on foreign stock exchanges with tough disclosure and transparency requirements have contributed positively to the quality of corporate governance in emerging market banks. Read together, the four papers give a good overview of the development of corporate governance practices and remaining problems in financial institutions of different types and with domicile in different countries.
Introduction. In the conditions of weakening of state control over the development of monetary and credit relations, the liberalization of foreign economic relations and the increase of the influence of the political situation on economic processes, the system of ensuring financial security of the state has a special role in the economy of Ukraine. Problems in the field of ensuring financial security do not allow creating conditions for economic growth, have a negative impact on the financial, tax, insurance and the budget process in the country. Therefore, in today's conditions, the issue of ensuring an adequate level of financial security of the state, defining the role in the system of its provision of financial institutions is important.Purpose. Study of the essence of financial security of Ukraine and determination of the role and importance of financial institutions in the system of ensuring financial security of the state.Methods. Analysis, synthesis, generalization.Results. The general problem of all financial regulators in Ukraine is an inadequate level of interaction and coordination with other public authorities, as well as insufficient transparency and openness of information about their activities. Normative acts regulating the functioning of state bodies usually establish a procedure for accountability and subordination to other authorities, as well as the possibility of interaction with them, but there are no real mechanisms for effective communication and coordination.Originality. This article explores practical aspects of financial security as the protection of state interests in the financial sector, the appropriate level of fiscal, tax and monetary system that guarantees state's ability to effectively generate, store excessive depreciation and rational use of financial resources of the country to ensure its socio-economic development and servicing of financial obligations. The role and importance in the system to ensure the financial security of the state financial institutions, including isolated and exposed three main groups of financial institutions, financial intermediaries; international financial institutions; financial institutions regulators.Conclusion. In order to ensure the financial security of the state of Ukraine, it is necessary to implement a set of measures aimed at increasing the participation of financial institutions in promoting the development of domestic business, supporting research, introducing innovations, etc. On the other hand, the implementation of a number of institutional and legal and organizational measures will greatly contribute to increasing the role of financial institutions in Ukraine's financial security system in the context of financial globalization.
The South Carolina State Board of Financial Institutions issues operational instructions to state-chartered banks, savings and loan associations, credit unions, and licensed consumer finance companies to clarify or change rules for engaging in certain activities. These instruction state that State chartered banks, savings and loan associations, and credit unions are authorized to establish offsite cash dispensing machines without the approval of the state Board of Financial Institutions provided deposits are not accepted.
This paper studies the effects of exempt treatment of financial services under a VATsystem. We develop a general equilibrium model with elastic labor supply, endogenous entry, anda banking sector. The banking sector provides loan services to producers and payment servicesto consumers. Our model display three key distortions under exempt treatment: (i) self-supplybias in the banking sector, (ii) consumption distortions, (iii) input distortions and tax cascading.Then, we calibrate our model to match the salient features of the tax system EU countries. Atax neutral policy regime switch from exempt treatment to full-taxation in loan services improveswelfare about 4%. Shutting down the entry margin has even bigger welfare gains. The same policyexercise for payment services also implies welfare gains and these gains greater than zero rating ofpayment services.
The South Carolina State Board of Financial Institutions issues operational instructions to state-chartered banks, savings and loan associations, credit unions, and licensed consumer finance companies to clarify or change rules for engaging in certain activities.
The South Carolina State Board of Financial Institutions issues operational instructions to state-chartered banks, savings and loan associations, credit unions, and licensed consumer finance companies to clarify or change rules for engaging in certain activities.
The chapter focuses on development financial institutions (DFIs) in Europe, that is public sector or government-invested legal entities with an explicit policy mandate to promote the socio-economic goals in a region, sector or specific market segment. DFIs play a relevant role in the economy, since they provide financial services to strategic sectors, sustain growth during period of recession, invest in physical and technological infrastructures. Besides, more recently, they are increasingly addressing their activity to yield social payoffs and positive externalities for society as a whole, such as stimulating technology innovation and channelling funds to long-term global societal challenges such as climate change, renewable and environmental-friendly energy, food security. In spite of their role in the economy, DFIs have not deserved a proper attention in the academic literature and they remain a quite under-analysed phenomenon. This chapter aims to fill this gap with a detailed analysis of firm-level characteristics and activities of contemporary European DFIs. Specifically, Section 2 introduces the phenomenon of development banks, explains the traditional theoretical framework where the existence of DFIs is discussed and why they represent a rising and important component of State Capitalism. Section 3 describes the characteristics of contemporary DFIs in Europe and discuss their growing role in funding innovation and supporting a response to global and new societal challenges. Section 4 presents the empirical analysis, which aims at discussing the role of DFIs as vehicles for state intervention in several sectors, with a specific focus on their strategic support to innovation. The dataset includes 132 entities, that is all the DFIs headquartered in Europe. Among them, 8 are sovranational, like the European Investment Banks, while the others are ultimately controlled by national (or even regional or local) governments. Economic and financial indicators are from Orbis, while information on DFIs mission, lending and funding activities, target industries and markets are collected case-by-case from annual reports, web sites and all public available information.
This study examines the impact of Financial Institution variables and operations on the level of capital flight in Nigeria for a period of forty two years. The financial institutions globally are expected to perform certain fundamental functions that are believed to the prerequisites for economic growth and stability. Required secondary data were sourced from the Central Bank of Nigeria statistical bulletin, the Nigeria Stock Exchange fact books and IMF financial reports while the Ordinary Least Square Method of Regression analysis and Co-integration Technique were employed to estimate and test the impact of selected economic and financial institutions' variables such as the prevailing Deposit Rate, Private Sector Credit, Change in Net Foreign Asset of Domestic Financial Institutions, Inflation Rate, Gross Capital Formation and Nigeria and U. S interest rate differentials on the level of capital outflow from Nigeria. With the World Bank and Erbe (1985) capital flight estimate, the findings reveal that all the explanatory variables are significance in explaining the behavior of capital. The results also show that each of the explanatory variables has specific impact on the dependent variable. Specifically, high inflation rate induces capital flight, increase Gross Capital Formation (LGCF) reduces capital flight, and appreciable deposit rate on bank deposit encourages domestic savings while the Credit to Private sector has not brought about the desire expectation of improving and sustaining the domestic economy. The study recommends that government should provide an enabling environment that will enhance the ability of the financial institutions to perform their functions effectively and the private individuals to invest in the domestic economy profitably. While financial institutions managers and operators should adhere to the sound ethical practices and desist from shape practices that encourage illegal transferring of money.
This study examines the impact of Financial Institution variables and operations on the level of capital flight in Nigeria for a period of forty two years. The financial institutions globally are expected to perform certain fundamental functions that are believed to the prerequisites for economic growth and stability. Required secondary data were sourced from the Central Bank of Nigeria statistical bulletin, the Nigeria Stock Exchange fact books and IMF financial reports while the Ordinary Least Square Method of Regression analysis and Co-integration Technique were employed to estimate and test the impact of selected economic and financial institutions' variables such as the prevailing Deposit Rate, Private Sector Credit, Change in Net Foreign Asset of Domestic Financial Institutions, Inflation Rate, Gross Capital Formation and Nigeria and U. S interest rate differentials on the level of capital outflow from Nigeria. With the World Bank and Erbe (1985) capital flight estimate, the findings reveal that all the explanatory variables are significance in explaining the behavior of capital. The results also show that each of the explanatory variables has specific impact on the dependent variable. Specifically, high inflation rate induces capital flight, increase Gross Capital Formation (LGCF) reduces capital flight, and appreciable deposit rate on bank deposit encourages domestic savings while the Credit to Private sector has not brought about the desire expectation of improving and sustaining the domestic economy. The study recommends that government should provide an enabling environment that will enhance the ability of the financial institutions to perform their functions effectively and the private individuals to invest in the domestic economy profitably. While financial institutions managers and operators should adhere to the sound ethical practices and desist from shape practices that encourage illegal transferring of money.
The South Carolina State Board of Financial Institutions issues operational instructions to state-chartered banks, savings and loan associations, credit unions, and licensed consumer finance companies to clarify or change rules for engaging in certain activities. These instructions state that state chartered credit unions may include in their field of membership students attending an institution of higher learning provided that employees of the institution are in the credit union's field of membership.
The fear of fraud is constant. Unfortunately, now more than ever before, fraud is being committed by employees on the inside, the very people who are supposed to be supporting and protecting an organization. Even though the financial industry is one of the most regulated, financial institution are still getting with the highest rate of internal fraud. Insider threat has always existed within each Financial Institution. In the recent years, insider threat has become a more prominent issue because of the emerging trends in the workplace. This change to a more flexible and productive workplace environment allows employees to easily gain access to an organization's critical and sensitive information. While the risk of insider threat has certainly increased, Financial Institution have not deployed enough controls to mitigate this risk either because they believe that the frequency of such threat is very low or because they feel powerless to do so. This paper tends to employ techniques that would abate the spate of Insider fraud and cybercrime on customer transactions and insider processing which is in full compliance with most regulatory mandate of Countries Government bank.
Part I briefly describes the traditional agency–cost approach to corporate governance and the rationale that is offered for elevating the agency–cost concerns of shareholders over those of other stakeholders (especially creditors). But as Part I goes on to argue, even if this justification for shareholder primacy is convincing in corporate governance generally (and there are many who do not find it so), several unique characteristics of banks obviate the reasoning behind shareholder primacy. Banks are highly leveraged, which exacerbates creditor–shareholder agency conflicts and places greater importance on the interests of creditors. Banks enjoy government guarantees, and thus their corporate governance (and allocation of gains and losses) is not merely a matter of private ordering, but one that implicates the public interest. And bank failures create massive negative social and economic costs not borne by bank investors, providing another key basis for rejecting shareholder primacy in bank governance. Part II provides an overview of the potential solutions for bank governance and argues that a realignment of bank governance priorities—specifically, deemphasizing shareholder primacy and expressly recognizing creditor interests—is likely to be most promising. Part II also briefly reviews the possibility of using existing laws—specifically, longstanding "commitment statutes" and the relatively recent phenomenon of statutes authorizing "benefit corporations"—as a means to help reorder bank governance.
