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Open Access (free)
A Crisis of Value
Author: Oonagh McDonald

This book explains the fundamental causes of the bank's failure, including the inadequacy of the regulatory and supervisory framework. For some, it was the repeal of the Glass-Steagall Act that was the overriding cause, not just of the collapse of Lehman Brothers, but of the financial crisis as a whole. The book argues that the cause is partly to be found both in weak and ineffective regulation and also in a programme of regulation and supervision that was simply not fit for the purpose. Lehman Brothers' long history began with three brothers, immigrants from Germany, who sold selling groceries and dry goods to local cotton farmers. Dick Fuld, the chairman and CEO, and his senior management, ignored the increased risks, choosing to rely on over-valuations of the firm's assets. The book examines the regulation of the Big Five investment banks in the context of the changes which took place in the structure of banking after the repeal of the Glass-Steagall Act. It describes the introduction of the European Union's Consolidated Supervision Directive in 2004. The book examines the whole issue of valuing Lehman's assets and details the regulations covering appraisals and valuations of real estate, applicable at the time and to consider Lehman's approach in the light of these regulations. It argues that that the valuation of Lehman's real estate assets was problematic to say the least, as the regulators did not require the investment banks to adopt a recognized methodology of valuation, and that Lehman's own methods were flawed.

Open Access (free)
Crisis, reform and recovery
Shalendra D. Sharma

agency. In fact, the agency not only “had to operate subject to intense political oversight, its effectiveness was compromised by a weak legal and regulatory framework and its need to obtain political authority, even for technical operations” (Enoch et al. 2001, 15). Nevertheless, the fact that IBRA’s restructuring agenda looked feasible raised hopes that finally something substantive was being done to deal with the country’s banking problems. On the basis of its review of the banks’ financial position, IBRA divided banks that had received substantial liquidity support

in The Asian financial crisis
Mark Harvey

competition is, empirically and optimally, into what amounts to a definition. Clusters of interconnected firms are seen to provide optimal competitive conditions for strategic differentiation, with the Porter diamond being used as a strategic tool for achieving the best combination of its four facets: factor inputs, supply chain networks, demand conditions, and regulatory frameworks and infrastructure. In this way, clusters are seen as being capable of going beyond static efficiency competition, beyond cost-reduction competition, and onwards and upwards to optimal forms of

in Market relations and the competitive process
Open Access (free)
The evolving international financial architecture
Shalendra D. Sharma

Securities Commissions (IOSCO), and for insurance supervision by the International Association of Insurance Supervisors (IAIS). To assist emerging-market economies to develop the necessary supervisory expertise, the IMF has been given the key task of helping to improve 292 Beyond the crisis the banking system of its members. This involves carrying out more intensive surveillance of the financial sectors of member countries, as well as helping members develop their financial sector supervisory and regulatory frameworks in conformity with international standards.15 Priority

in The Asian financial crisis
Open Access (free)
January to September 2008
Oonagh McDonald

-down on its holdings of mortgage assets, followed by substantial falls in its share prices. Inaction with regard to Lehman Brothers will be set out in the following chapters. Looking back on it all, Mary Shapiro, who became Chairman of the SEC in January 2009, accepted the inadequacies of the CSE programme, due in part to a ‘siloed financial regulatory framework that lacked the ability to monitor and reduce risks flowing across the regulated entities and markets; and the lack of an adequate statutory framework for the oversight of large investment

in Lehman Brothers
Why China survived the financial crisis
Shalendra D. Sharma

direction. China needs to create a capital market to supplement the role of banks in the allocation of capital. Bonds can serve as a more effective instrument than bank loans in providing long-term capital for infrastructure and other projects with long gestation periods. Moreover, equity markets can supplement bank financing for enterprises, thereby enabling them to achieve a more balanced financing structure. Yet it is also important to note that much more in the shape of both funds and strengthening of the supervisory and regulatory framework is needed.45 Since early

in The Asian financial crisis
Open Access (free)
Issues, debates and an overview of the crisis
Shalendra D. Sharma

authorities failed to carry out prudential screening of applicants to check out their creditworthiness. Rather, in Indonesia, where roughly 50 per cent of banks belonged to a narrow circle of business groups, and the other 50 per cent were state-owned, the system allowed Suharto family members and their cronies preferential access to resources. In this environment, supervisory and regulatory frameworks could hardly stop the well-connected borrowers from getting access to funds, and in the process becoming even more highly leveraged. Similarly, in Thailand (where a small

in The Asian financial crisis
Open Access (free)
Crisis, reform and recovery
Shalendra D. Sharma

regulatory regime, merchant banks assumed much higher interest rate and currency risk than the commercial banks. Their lending concentration inside affiliated groups was greater, and 206 Korea: crisis, reform and recovery merchant banks usually lent without collateral – and thus had less protection in case of default. Compounding this problem was the maintenance of tight monetary policy and a regulatory framework that was explicitly biased towards short-term borrowing. That is, short-term loans regarded as trade-related financing were hardly regulated, whereas long

in The Asian financial crisis
Open Access (free)
Crisis, reform and recovery
Shalendra D. Sharma

restructuring the government stated its objective to “move ahead as expeditiously as possible with the restructuring of the 58 suspended finance companies,” and elaborated a strategy to recapitalize and strengthen the remainder of the financial system “so that its regulatory framework can be brought fully in line with international best practices by the year 2000.” In addition, the letter explicitly noted that “the BOT will have a clear mandate to carry out the necessary restructuring of the sector, including (i) the tightening of loan classification rules, (ii) timetables for

in The Asian financial crisis