IDEAS home Printed from https://ideas.repec.org/a/eme/jfrcpp/v17y2009i3p186-209.html
   My bibliography  Save this article

Ignoring the lessons for effective prudential supervision, failed bank resolution and depositor protection

Author

Listed:
  • Gillian G.H. Garcia

Abstract

Purpose - The purpose of this paper is to establish three sets of principles – the first for effective prudential supervision of financial institutions; the second for the timely resolution of failed institutions and the management of financial crises; and the third for the successful protection of deposits. It also aims to show how these principles have been eschewed, especially in the USA and the UK. Design/methodology/approach - The first set of principles and examples of their violation are determined from material loss reviews conducted by agency inspectors general, government reports, and academic research. The second set of principles is derived from International Monetary Fund practice and research; violations are those reported in government reports, published research, and press articles. The third set of principles is chosen from those proposed by the Basel Committee on Banking Supervision and the International Association of Deposit Insurers. Violations are those reported in academic and practitioner research and the press. Findings - Many of the three sets of principles have been ignored in the current financial crisis. Research limitations/implications - Experience in previous crises has shown that eschewing these principles delays the resolution of individual failed institutions, increases resolutions costs, and delays the recover from the crisis. If the legal and regulatory system is to be reformed appropriately to prevent a recurrence, future research must discover the reasons why the principles have not been followed. Originality/value - The paper assembles three sets of principles and instances where they have been violated in order to help policymakers, practitioners and researchers to focus on where and what reforms are needed to prevent a recurrence of the current severe financial crisis.

Suggested Citation

  • Gillian G.H. Garcia, 2009. "Ignoring the lessons for effective prudential supervision, failed bank resolution and depositor protection," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 17(3), pages 186-209, July.
  • Handle: RePEc:eme:jfrcpp:v:17:y:2009:i:3:p:186-209
    as

    Download full text from publisher

    File URL: http://www.emeraldinsight.com/10.1108/13581980910972205?utm_campaign=RePEc&WT.mc_id=RePEc
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Carolyn Currie, 2003. "Towards a General Theory of Financial Regulation: Predicting, Measuring and Preventing Financial Crises," Working Paper Series 132, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    2. Carolyn Currie, 2004. "Basel II and Operational Risk - Overview of Key Concerns," Working Paper Series 134, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    3. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold, 2002. "Parametric and Nonparametric Volatility Measurement," NBER Technical Working Papers 0279, National Bureau of Economic Research, Inc.
    4. Andreas Jobst, 2007. "Operational Risk; The Sting is Still in the Tail But the Poison Dependson the Dose," IMF Working Papers 07/239, International Monetary Fund.
    5. Carolyn Currie, 2006. "A Test Of The Strategic Effect Of Basel Ii Operational Risk Requirements On Banks," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(4), pages 6-28, November.
    6. Kabir K. Dutta & David F. Babbel, 2002. "On Measuring Skewness and Kurtosis in Short Rate Distributions: The Case of the US Dollar London Inter Bank Offer Rates," Center for Financial Institutions Working Papers 02-25, Wharton School Center for Financial Institutions, University of Pennsylvania.
    7. Kabir K. Dutta & David F. Babbel, 2005. "Extracting Probabilistic Information from the Prices of Interest Rate Options: Tests of Distributional Assumptions," The Journal of Business, University of Chicago Press, vol. 78(3), pages 841-870, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Banks; Savings; Regulations;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jfrcpp:v:17:y:2009:i:3:p:186-209. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman). General contact details of provider: http://www.emeraldinsight.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.