金融市場與機(jī)構(gòu) Jeff Madura 18

18BankRegulationChapterObjectivesDescribethekeyregulationsimposedoncommercialbanksExplaindevelopmentofbankregulationovertimeEvaluatetheareasofbankregulationDescribethemainprovisionsoftheFinancialServicesModernizationActof1999BackgroundBankingindustryhasexperiencedtremendouschangeinrecentyearsPost-DepressionlegislationfocusedonsafetyandsoundnessofcommercialbanksDeregulationoffinancialservicesindustryIntensecompetition/consolidationExpansion--economiesofscale3WhyBanksAreRegulated?Depositsare70%ofmoneysupplyCenterofpaymentsmechanismPrimarytransmitterofmonetarypolicyMajorliquidityprovidertoeconomyMakeloansDepositsareliquidassetsofcustomersLiabilitiesaremajor,lowriskassetsofconsumersRegulatoryStructureTheregulatorystructureofthebankingsystemintheU.S.isuniqueDualbankingsystem:FederalandStateCharterStatecharter=statebankRegulatedbystatebankingagencyFederalcharter=nationalbankRegulatedbyComptrolleroftheCurrencyRegulatoryStructureBanksthataremembersoftheFederalReservearealsoregulatedbytheFedBanksthatareinsuredbytheFederalDepositInsuranceCorporationarealsoregulatedbytheFDICRegulatoryoverlap:FDICFederalReserveSystemStatebankingauthoritiesNowSecuritiesandExchangeCommission--stockRegulatoryStructureRegulationofbankownershipBankindependentlyownedBankownedbyaholdingcompanyPopularitystemsfromamendmentstotheBankHoldingCompanyActin1970AllowedBHC’smoreflexibilitytoparticipateinactivitieslikeleasing,mortgagebanking,anddataprocessing,andlater,Insurance,securitiesunderwriting,etc.DeregulationActof1980InitiatedtoreducebankregulationsandincreaseFedmonetarypolicyeffectivenessAlsoknownasDIDMCAPhaseoutofdepositrateceilingsInterestrateceilingswerepreviouslyenforcedbyRegulationQ.Phasedoutby1986TheactallowedbankstomaketheirowndecisionsonwhatinterestratestoofferondepositsAllowanceofcheckabledepositsforalldepositoryinstitutionsNOWaccountsDeregulationActof1980NewlendingflexibilityfordepositoryinstitutionsAllowedS&LstoofferlimitedcommercialandconsumerloansExplicitpricingofFedservicesEnsurestheFedonlyprovidesservices,suchascheckclearing,thatitcanprovideefficientlyImpactoftheDIDMCAConsumersshifttoNOWaccountsandCDs,sobanksnowpaymoreforfundsthanbefore.Also,increasedcompetitionbetweendepositoryinstitutionsGarn-St.GermainAct,1982CameatatimewhensomedepositoryinstitutionswereexperiencingseverefinancialproblemsPermitteddepositoryinstitutionstooffermoneymarketdepositaccountstocompetewithmoneymarketmutualfundsAlsoalloweddepositoryinstitutionstoacquirefailinginstitutionsacrossgeographicboundariesIngeneral,consumersappeartohavebenefitedfromderegulationRegulationofDepositInsuranceDepositinsurancebeganin1933withcreationofFederalDepositInsuranceCorporationinresponsetobankruns/failuresin1920s(agricultural)andearly1930’s(Depression)Between1930-193220%ofbanksfailed.Initialwaveoffailuresresultedinrunsonotherbanks,someofwhichwerehealthyTheamountofdepositsinsuredperpersonhasincreasedfrom$2,500in1933to$100,000todayRegulationofDepositInsuranceThepooloffundsusedtocoverinsureddepositorsiscalledtheBankInsuranceFundSupportedbyannualinsurancepremiumspaidbycommercialbanksUntil1991,theratewasthesameforallbanks,regardlessofrisk,causingmoralhazardproblemFederalDepositInsuranceAct(FDICA)of1991phasedinrisk-basedinsurancepremiumsRegulationofCapitalBanksarerequiredtomaintainaminimumamountofcapitalasapercentageoftotalassetsBankspreferlowcapitalratiostoboostROERegulatorspreferhigherlevelstoabsorboperatinglossesInthe1988BaselAccordcentralbankersof12countriesagreedtouniform,risk-basedcapitalrequirementsRegulationofCapitalUseoftheValue-at-RiskmethodtodeterminecapitalrequirementsIn1998,largebankswithsubstantialtradingbusinessesbeganusingtheirowninternalmeasuresofmarketrisktoadjusttheircapitalrequirements.UseaVAR(value-at-risk)model,usuallywitha99percentconfidenceintervalPrecursorto1991risk-basedcapitalrequirementsRegulationofCapitalTestingthevalidityofabank’sVARUsesbacktestswithactualdailytradinggainsorlossesIftheVARisestimatedproperly,only1percentoftheactualtradingdaysshouldshowresultsworsethantheestimatedVARRelatedstresstestsBankidentifiesapossibleextremeeventtoestimatepotentiallossesRegulationofOperationsRegulationofloansRegulatorsmonitor:LoanqualityLoandiversificationgeographicallyandbyindustryAdequacyofloanlossreservesExposuretodebtofforeigncountriesRegulationofinvestmentsecuritiesNon-equity,investmentgradeinvestmentsProvidesincomeandliquiditytobankInvestmentbankingactivityonlyinstateandmunicipalbondsRegulationofOperationsRegulationofsecuritiesservicesBankingActof1933(Glass-Steagall)separatedbankingandsecuritiesservicesIntendedtopreventconflictsofinterestandself-interestlendingDeregulationofcorporatedebtunderwritingservices,1989CommercialpaperandcorporatedebtsecuritiesStillnocommonstockunderwritingRegulationofOperationsTheFinancialServicesModernizationAct,1999EssentiallyrepealedtheGlass-SteagallActEnablescommercialbankstomoreeasilypursuestockunderwritingandinsuranceactivitiesDeregulationofbrokerageservicesInthelate1990ssomebanksacquiredfinancialservicesfirms.CiticorpandTraveler’sInsuranceGroup,whichownedSolomonBrothersandSmithBarney,mergedRegulationofOperationsDeregulationofmutualfundsservicesTheFedruledin1986toallowbrokeragesubsidiariesofbankholdingcompaniestosellmutualfundsRegulationofOperationsRegulationofinsuranceservicesBanksthatalreadyparticipatedininsurancebefore1971weregrandfatheredBankssometimesleasedspacetoinsuranceorservedasagent,butnotunderwritinginsuranceBanksabletounderwriteannuities,1995ThepassageoftheFinancialServicesModernizationAct(1999)confirmedthatbanksandinsurerscouldconsolidatetheiroperationsRegulationofoff-balancesheettransactionsRisk-basedcapitalrequirementsarehigherforbankswithmoreoff-balancesheetactivitiesRegulationofInterstateExpansionTheMcFaddenActof1927preventedbanksfromestablishingbranchesacrossstatelines.Nointerstatebankholdingcompanymergers(1956)Intentwastopreventlargebankmarketcontrol,butlimitedcompetitiontointrastatebankingSlowchangesinstatebankinglawtopermitinterstatebankingRegulationofInterstateExpansionInterstateBankingActReigle-NealInterstateBankingandBranchingEfficiencyActof1994EliminatedmostrestrictionsoninterstatebankmergersandallowedcommercialbankstoopenbranchesnationwideAllowedinterstatebankholdingcompaniestoconsolidateintoonecharterReducescoststoconsumersandaddsconvenience—promotescompetitionBankstakeadvantageofeconomiesofscaleHowRegulatorsMonitorBanksRegulatorsexaminecommercialbanksatleastonceperyearCAMELSratingsCapitaladequacyRegulatorsdeterminethe“adequacy”ofcapitalMorecapitalallowsbankstoabsorblossesAssetqualityCreditriskPortfolio’scompositionandexposuretopotentialeventsHowRegulatorsMonitorBanksManagementRatesmanagementaccordingtoadministrativeskills,abilitytocomplywithexistingregulations,andabilitytocopewithachangingenvironment.VerysubjectiveEarningsBanksfailwhentheirearningsareconsistentlynegativeCommonlyusedratio:ReturnonAssets(ROA)HowRegulatorsMonitorBanksLiquidityExtentofrelianceonoutsidesourcesforfunds(discountwindow,federalfunds)SensitivitytointerestratechangesandmarketconditionsRatingbankcharacteristicsEachoftheCAMELcharacteristicsisratedona1-to-5scale,with1indicatingoutstandingUsedtoidentifyproblembanksSubjectiveopinionmustbeusedtosupplementobjectivemeasuresHowRegulatorsMonitorBanksCorrectiveactionbyregulatorsWhenaproblembankisidentifieditisthoroughlyinvestigated(examined)byregulatorsTheymayrequirespecificcorrectiveaction,suchasboostingcapitalordelayexpansionRegulatorshavetheauthoritytotakelegalactionagainstabankiftheydonotcomplyHowRegulatorsMonitorBanksFundingtheclosureoffailingbanksFDICisresponsibleforclosingfailingbanksLiquidatingfailedbank'sassetsFacilitatingacquisitionbyanotherbankFederalDepositInsuranceCorporationImprovementAct(FDICIA)of1991RegulatorsrequiredtoactmorequicklyforundercapitalizedbanksRisk-baseddepositinsurancepremiumsClosefailingbank