Banking supervision and regulation: Possible changes as a consequence of the global financial crisis Master Thesis Author: Bc. Jaroslav Mihok Supervisor: PhDr. Adam Geršl Ph.D. Academic Year: 2010/2011 Abstract The thesis is devoted to the analysis of recent global financial crisis and subsequent reform of the regulatory and supervisory framework. After the discussion of the causes of the crisis the proposed reforms are presented. The presentation of the reforms is divided into three parts. The first one consists of the global initiatives and general recommendations. Subsequent two parts focus on the specifics of the reforms in the United States of America and in the European Union. Afterwards the reforms are compared and subjected to the critical analysis. Key words: Dodd-Frank Act, De Larosière report, financial crisis, reform of the regulatory and supervisory framework

Financial regulation is a topical; issue particularly its potential negative impact on economic growth. Literature indicates that researchers have divided opinions on the subject. There is a group that believes higher financial regulation will deter economic growth and another group that believes that current financial regulations should be increased. The aim of the study was to investigate the impact of financial regulation on economic growth in developing countries.The study was undertaken by formulating one overall research question, which was supported by two hypotheses. The study employed quantitative methodology to analyse the data. Secondary data was collected on a sample of ten developing countries in three regions (Africa, Americas and Asia Pacific). Time series data was obtained on the following variables: gross domestic products, inflation rate, interest rate, unemployment rate and financial freedom index. The data was initially analysed using trend analysis, which was followed by regression analysis. Trend analysis indicates that financial regulation is good for economic growth in developing countries. Financial regulation was measured by the financial freedom index and economic growth was measured by growth in gross domestic products.The results show a negative correlation between the two variables. When strict financial regulations are imposed, growth in gross domestic product increases. This relationship was tested statistically to quantify the percentage of change in gross domestic product attributable to financial regulation as well as its significance. It was discovered that financial regulation on its own can explain up to 17.8% of the change in gross domestic product and is a very significant explanatory variable. / Dissertation (MBA)--University of Pretoria, 2012. / Gordon Institute of Business Science (GIBS) / unrestricted

The term procyclicality refers to the ability of a system to amplify business cycles. The recent financial crisis has revealed that the current regulatory framework, Basel II, affects the business cycle in exactly that manner. The newly published Basel III therefore sought to include tools that would mitigate the procyclical nature of regulatory framework. The aim of the thesis is to analyze whether such tools are effective and whether the procyclicality under Basel III has been mitigated when compared to Basel II. In order to conduct such analysis we employ a simple model with the households and firms sector. Using the OLS estimation method we estimate the sensitivity of Basel risk weights to the business cycle under both Basel II and Basel III conditions. As the Basel III framework has been published only recently, there are few studies that would analyze its effect on procyclicality. The main contribution of this thesis consists of implementation of Basel III countercyclical tools and the comparison between both frameworks. The thesis further contributes to the existing literature by conducting the analysis on the data for the Visegrád Group, that is for the Czech Republic, Slovakia, Hungary and Poland. JEL Classification E32, E44, E58, G21 Keywords procyclicality, Basel II, Basel III, banking...

After decades of political and technical efforts to supranationalise prudential regulation at the EU level, a key step to bridge the gap between rule-making centralisation and its decentralised implementation has been the establishment of the Single Supervisory Mechanism (SSM). In spite of its major accomplishments, the SSM faces a key challenge: achieving supervisory consistency in essentially diversified euro area banking systems. This dissertation identifies the building blocks of supervisory consistency and the sources of diversity inherent in banking supervision; it also distinguishes internal from external dimensions of consistency, which correspond to national and banking diversities, respectively. Drawing on the qualitative analysis of official documents, speeches, public hearings, and interviews with national and supranational supervisors, banks, banks associations, and EU institutions, the research examines the relationships shaping the balance between consistency in integrated markets and diversity, by focusing on the SSM’s prudential and regulatory competences. It first traces and compares the evolution of supervisory governance through literature- and empirically-driven governance indicators and their conceptualisation. It then analyses the changing nature of the supervisory instruments beyond the hard-soft law dichotomy. The German and Italian cases are used to test the capacity of the supranational supervisor to accommodate diversity, and illustrate how different supervisory styles have emerged over time. This study argues that centralisation, methodological standardisation, and the development of non-binding policy documents are important for the achievement of consistent results. However, the effectiveness of supranational law and its enforcement by the European Central Bank involve fundamental trade-offs: a more limited local autonomy, institutional overlap, communication and transparency concerns from banks, and legitimacy issues arising from supervisory instruments, can compromise the system. Nonetheless, thanks to its resources and privileged Banking Union-wide position, the SSM is well-placed to strengthen sensitivity to diversity in order to manage the current transformation of traditional banking paradigms.

Yes / We examine the effects of banking supervisory architecture on central bank preferences, quantified through a recently proposed measure of central bank conservatism. Using a dynamic panel data specification we document that central banks serving both monetary policy and banking supervision functions are less inflation conservative than those with only a price stability mandate.

Os Bancos Centrais executam a primordial função de buscar a estabilidade monetária em seus respectivos países. Além disto, são também responsáveis pela condução e gerenciamento do sistema de pagamentos e pela condição de prestamista de última instância. As atividades de fiscalização do sistema bancário, no entanto, podem ou não ser de incumbência das autoridades monetárias. Percebe-se, ao longo das décadas mais recentes, que alguns países vêm promovendo mudanças em suas estruturas de alocação das áreas de supervisão, tanto no sentido de delegar esta responsabilidade a uma agência quanto na possibilidade de integrar a supervisão bancária com outras áreas, tais como a de seguros e a do mercado de capitais e títulos. Estas questões, como a de deixar ou não a supervisão inserida dentro dos bancos centrais, e a da sua integração ou não com outras áreas, têm proporcionado diversos debates, tendo sido apontados tanto pontos favoráveis quanto desfavoráveis, em cada uma das situações propostas. No entanto, estes discursos são ainda incipientes, e tal análise ainda carece de novas reflexões. Foi a dificuldade teórica em se definir um modelo de maior eficiência institucional para os países que serviu como ponto de partida e incentivo para o presente estudo. Desta forma, o trabalho aqui apresentado teve como objetivo principal o de identificar características comuns entre alguns dos países que adotam modelos similares. Com base em testes econométricos, foram buscadas associações por meio de probabilidades. Os demais objetivos foram os de mostrar e discutir as experiências de alguns destes países, bem como evidências empíricas encontradas até o presente momento relacionadas ao tema principal deste trabalho. Além disto, a pesquisa descrita também procurou levantar as vantagens e as desvantagens de cada modelo. Os resultados encontrados mostraram haver relação entre os modelos adotados e os poderes do órgão supervisor, os poderes da auditoria externa, a localização geográfica, os índices de inflação, de renda, de nível de consolidação da supervisão financeira, de envolvimento do banco central no processo de supervisão e avaliação do sistema legal. Foi possível concluir que, seja qual for o modelo escolhido, a autoridade monetária deve continuar com alguma forma de participação no processo, seja de forma direta ou indireta, através de canais de comunicação abertos entre esta e os demais órgãos ou agências envolvidos. Isto se deve, principalmente, à ligação estreita que existe entre a solidez do sistema financeiro e a estabilidade monetária de um país, bem como pelo fato das funções de prestamista de última instância e de responsável pelos sistemas de pagamento permanecerem inseridas dentro dos bancos centrais. / Central Banks perform as their main function the search for monetary stability in their respective countries. Besides, they are also responsible for conducting and managing the national payments systems as well as for the condition of lender of last resort. The activities of banking supervision, however, may fall or not under the responsibility of Central Banks. One can realize, along the last decades, that some countries have been implementing some changes in their institutional allocation of banking supervision, either by delegating this responsibility to an agency (external to Central Bank) or by integrating banking supervision with different areas, such as supervision of insurance companies and capital/securities markets. Questions such as “to leave or not banking supervision under the responsibility of central banks?” or “to integrate or not banking supervision with different areas?” have generated several debates, and different aspects, favourable or not, have been pointed out, in each of the proposed situations. However, those discussions are still incipient, and this analysis is still lacking further reflection. It was exactly the theoretical challenge to define a model which should present a bigger institutional efficiency for different countries that has served both as a starting point and as a motivation for the present study. This way, the main goal of the present work was to identify some characteristics in common among some of the countries which have adopted similar models. Based in econometric tests, some associations between selected variables were searched, by means of probabilities estimation. The remainder objectives of the present research are described as follows: to present and to discuss the related experiences of a few selected countries which had adopted some of the analyzed models; to show some empirical evidences which are associated to the same analysis. Moreover, the here described research was also directed to collect the advantages and disadvantages that could be found out in each model. The achieved results pointed out to the existence of a relationship between the adopted model and the powers that the supervisory agency may possess; the powers of external auditing; geographical localization; income indexes; inflation indexes; indexes of level of consolidation of financial supervision; indexes to estimate the involvement of a central bank in the banking supervision process; and finally, an evaluation of the respective national legal system. It was also possible to conclude that, whatever is the selected model, the monetary authority should maintain some sort of participation in this process, either directly or indirectly; by means of communication channels that must be established between this authority and the remainder involved hierarchical structures or agencies. This conclusion is chiefly due to the close link that exists between the strength of a financial system and the monetary stability of a country, as well as to the fact that the functions of lender of last resort and the responsibility for the national payments system are still being under the responsibility of central banks.

Os Bancos Centrais executam a primordial função de buscar a estabilidade monetária em seus respectivos países. Além disto, são também responsáveis pela condução e gerenciamento do sistema de pagamentos e pela condição de prestamista de última instância. As atividades de fiscalização do sistema bancário, no entanto, podem ou não ser de incumbência das autoridades monetárias. Percebe-se, ao longo das décadas mais recentes, que alguns países vêm promovendo mudanças em suas estruturas de alocação das áreas de supervisão, tanto no sentido de delegar esta responsabilidade a uma agência quanto na possibilidade de integrar a supervisão bancária com outras áreas, tais como a de seguros e a do mercado de capitais e títulos. Estas questões, como a de deixar ou não a supervisão inserida dentro dos bancos centrais, e a da sua integração ou não com outras áreas, têm proporcionado diversos debates, tendo sido apontados tanto pontos favoráveis quanto desfavoráveis, em cada uma das situações propostas. No entanto, estes discursos são ainda incipientes, e tal análise ainda carece de novas reflexões. Foi a dificuldade teórica em se definir um modelo de maior eficiência institucional para os países que serviu como ponto de partida e incentivo para o presente estudo. Desta forma, o trabalho aqui apresentado teve como objetivo principal o de identificar características comuns entre alguns dos países que adotam modelos similares. Com base em testes econométricos, foram buscadas associações por meio de probabilidades. Os demais objetivos foram os de mostrar e discutir as experiências de alguns destes países, bem como evidências empíricas encontradas até o presente momento relacionadas ao tema principal deste trabalho. Além disto, a pesquisa descrita também procurou levantar as vantagens e as desvantagens de cada modelo. Os resultados encontrados mostraram haver relação entre os modelos adotados e os poderes do órgão supervisor, os poderes da auditoria externa, a localização geográfica, os índices de inflação, de renda, de nível de consolidação da supervisão financeira, de envolvimento do banco central no processo de supervisão e avaliação do sistema legal. Foi possível concluir que, seja qual for o modelo escolhido, a autoridade monetária deve continuar com alguma forma de participação no processo, seja de forma direta ou indireta, através de canais de comunicação abertos entre esta e os demais órgãos ou agências envolvidos. Isto se deve, principalmente, à ligação estreita que existe entre a solidez do sistema financeiro e a estabilidade monetária de um país, bem como pelo fato das funções de prestamista de última instância e de responsável pelos sistemas de pagamento permanecerem inseridas dentro dos bancos centrais. / Central Banks perform as their main function the search for monetary stability in their respective countries. Besides, they are also responsible for conducting and managing the national payments systems as well as for the condition of lender of last resort. The activities of banking supervision, however, may fall or not under the responsibility of Central Banks. One can realize, along the last decades, that some countries have been implementing some changes in their institutional allocation of banking supervision, either by delegating this responsibility to an agency (external to Central Bank) or by integrating banking supervision with different areas, such as supervision of insurance companies and capital/securities markets. Questions such as “to leave or not banking supervision under the responsibility of central banks?” or “to integrate or not banking supervision with different areas?” have generated several debates, and different aspects, favourable or not, have been pointed out, in each of the proposed situations. However, those discussions are still incipient, and this analysis is still lacking further reflection. It was exactly the theoretical challenge to define a model which should present a bigger institutional efficiency for different countries that has served both as a starting point and as a motivation for the present study. This way, the main goal of the present work was to identify some characteristics in common among some of the countries which have adopted similar models. Based in econometric tests, some associations between selected variables were searched, by means of probabilities estimation. The remainder objectives of the present research are described as follows: to present and to discuss the related experiences of a few selected countries which had adopted some of the analyzed models; to show some empirical evidences which are associated to the same analysis. Moreover, the here described research was also directed to collect the advantages and disadvantages that could be found out in each model. The achieved results pointed out to the existence of a relationship between the adopted model and the powers that the supervisory agency may possess; the powers of external auditing; geographical localization; income indexes; inflation indexes; indexes of level of consolidation of financial supervision; indexes to estimate the involvement of a central bank in the banking supervision process; and finally, an evaluation of the respective national legal system. It was also possible to conclude that, whatever is the selected model, the monetary authority should maintain some sort of participation in this process, either directly or indirectly; by means of communication channels that must be established between this authority and the remainder involved hierarchical structures or agencies. This conclusion is chiefly due to the close link that exists between the strength of a financial system and the monetary stability of a country, as well as to the fact that the functions of lender of last resort and the responsibility for the national payments system are still being under the responsibility of central banks.

Os Bancos Centrais executam a primordial função de buscar a estabilidade monetária em seus respectivos países. Além disto, são também responsáveis pela condução e gerenciamento do sistema de pagamentos e pela condição de prestamista de última instância. As atividades de fiscalização do sistema bancário, no entanto, podem ou não ser de incumbência das autoridades monetárias. Percebe-se, ao longo das décadas mais recentes, que alguns países vêm promovendo mudanças em suas estruturas de alocação das áreas de supervisão, tanto no sentido de delegar esta responsabilidade a uma agência quanto na possibilidade de integrar a supervisão bancária com outras áreas, tais como a de seguros e a do mercado de capitais e títulos. Estas questões, como a de deixar ou não a supervisão inserida dentro dos bancos centrais, e a da sua integração ou não com outras áreas, têm proporcionado diversos debates, tendo sido apontados tanto pontos favoráveis quanto desfavoráveis, em cada uma das situações propostas. No entanto, estes discursos são ainda incipientes, e tal análise ainda carece de novas reflexões. Foi a dificuldade teórica em se definir um modelo de maior eficiência institucional para os países que serviu como ponto de partida e incentivo para o presente estudo. Desta forma, o trabalho aqui apresentado teve como objetivo principal o de identificar características comuns entre alguns dos países que adotam modelos similares. Com base em testes econométricos, foram buscadas associações por meio de probabilidades. Os demais objetivos foram os de mostrar e discutir as experiências de alguns destes países, bem como evidências empíricas encontradas até o presente momento relacionadas ao tema principal deste trabalho. Além disto, a pesquisa descrita também procurou levantar as vantagens e as desvantagens de cada modelo. Os resultados encontrados mostraram haver relação entre os modelos adotados e os poderes do órgão supervisor, os poderes da auditoria externa, a localização geográfica, os índices de inflação, de renda, de nível de consolidação da supervisão financeira, de envolvimento do banco central no processo de supervisão e avaliação do sistema legal. Foi possível concluir que, seja qual for o modelo escolhido, a autoridade monetária deve continuar com alguma forma de participação no processo, seja de forma direta ou indireta, através de canais de comunicação abertos entre esta e os demais órgãos ou agências envolvidos. Isto se deve, principalmente, à ligação estreita que existe entre a solidez do sistema financeiro e a estabilidade monetária de um país, bem como pelo fato das funções de prestamista de última instância e de responsável pelos sistemas de pagamento permanecerem inseridas dentro dos bancos centrais. / Central Banks perform as their main function the search for monetary stability in their respective countries. Besides, they are also responsible for conducting and managing the national payments systems as well as for the condition of lender of last resort. The activities of banking supervision, however, may fall or not under the responsibility of Central Banks. One can realize, along the last decades, that some countries have been implementing some changes in their institutional allocation of banking supervision, either by delegating this responsibility to an agency (external to Central Bank) or by integrating banking supervision with different areas, such as supervision of insurance companies and capital/securities markets. Questions such as “to leave or not banking supervision under the responsibility of central banks?” or “to integrate or not banking supervision with different areas?” have generated several debates, and different aspects, favourable or not, have been pointed out, in each of the proposed situations. However, those discussions are still incipient, and this analysis is still lacking further reflection. It was exactly the theoretical challenge to define a model which should present a bigger institutional efficiency for different countries that has served both as a starting point and as a motivation for the present study. This way, the main goal of the present work was to identify some characteristics in common among some of the countries which have adopted similar models. Based in econometric tests, some associations between selected variables were searched, by means of probabilities estimation. The remainder objectives of the present research are described as follows: to present and to discuss the related experiences of a few selected countries which had adopted some of the analyzed models; to show some empirical evidences which are associated to the same analysis. Moreover, the here described research was also directed to collect the advantages and disadvantages that could be found out in each model. The achieved results pointed out to the existence of a relationship between the adopted model and the powers that the supervisory agency may possess; the powers of external auditing; geographical localization; income indexes; inflation indexes; indexes of level of consolidation of financial supervision; indexes to estimate the involvement of a central bank in the banking supervision process; and finally, an evaluation of the respective national legal system. It was also possible to conclude that, whatever is the selected model, the monetary authority should maintain some sort of participation in this process, either directly or indirectly; by means of communication channels that must be established between this authority and the remainder involved hierarchical structures or agencies. This conclusion is chiefly due to the close link that exists between the strength of a financial system and the monetary stability of a country, as well as to the fact that the functions of lender of last resort and the responsibility for the national payments system are still being under the responsibility of central banks.

Thesis (MBA)--Stellenbosch University, 2007. / ENGLISH ABSTRACT: The primary purpose of the research study is to establish whether the supervisory regime of the Central Bank of Liberia (hereinafter referred to as CBL) is adequate to provide effective and efficient bank supervision that will ensure stability in the financial system. Stability in the financial sector and safety and soundness of the banking industry are of paramount importance due to its linkages with all other sectors of the economy. Adequate supervision and prudential regulations are central in ensuring financial sector stability. This research focuses on the prudential regulations and other supervisory directives used in the supervision of licensed bank-financial institutions, in terms of capital adequacy, asset quality, management, earnings, liquidity and sensitivity to market risk, the supervisory approach and the legal framework. The adequacy of the prudential regulations and other supervisory directives are determined by comparing with international standards. The results revealed that the prudential regulations largely meet international standards. Thus, the supervisory regime is adequate and capable of providing stability in the banking industry. Banks are exposed to various kinds of risks in the conduct of their trading operations; therefore, management is required to maintain a capital position that will cover the nature and extent of risks to the bank:. The capital consists of two tiers; Tier I (primary) capital and Tier 2 (secondary) capital. Banks are required to permanently maintain a capital adequacy ratio that matches their total exposure to risk at the level of at least 8%. The prudential regulations of the Central Bank of Liberia places assets into two risk baskets while international organizations like the Bank for International Settlement has four or five risk baskets based on the category of borrower, sovereigns, banks or corporates. Earning assets reflect the bank's quality and existing potential of exposure to counter-party associated with loan and investment portfolios, as well as off-balance sheet transactions. Banks are required to make adequate provisioning against deteriorating loan portfolios and general provisions for performing loans. Sound and competent management is the most significant requirement for the strength, potency and growth of any financial institution. Indicators of the quality of management's competence are primarily specific to individual institutions. Moreover, it is not easy to draw any conclusion vis-à-vis management soundness on the basis of monetary indicators, as characteristics of a good management are rather qualitative in nature. Strong earnings and profitability profiles of a financial institution reflect its capacity to absorb losses, fund expansion, be competitive in the banking industry, replenish and/or increase capital base and pay dividends to shareholders. Good earnings quality is relied upon by banking institutions as their first line of defense against capital reduction due to credit losses, interest rate risk, operational risk and decline in asset value. Liquidity is often considered as an attestation of solvency for banking institutions. Banks must maintain a minimum level of liquidity to settle obligations such withdrawals and for giving out loans. Liquidity is a strong early warning signal, the shortage and/or the lack of which erodes public confidence in a bank. Banks must guide against structural maturity mismatch. Imprudent lending practice increases a bank's exposure to liquidity risk. All licensed banks are statutorily required to maintain a minimum daily liquidity ratio of 15%, which is a measure of the banks' liquid assets vis-à-vis deposits. Each commercial bank is required to maintain reserve requirements representing 18% of average deposits. A suitable legal framework is a prerequisite for effective banking supervision. Supervisors can be expected to act, free from political pressures, only if they cannot be dismissed for doing their job. The New Financial Institutions Act 1999 and the Central Bank Act 1999 give the Central Bank powers to grant and revoke bank. licenses, supervise commercial banks and have unlimited access to privileged information. There is a need to further strengthen the supervisory capacity in terms of providing continuous short-term training and long-term or post-graduate studies. / AFRIKAANSE OPSOMMING: Die hoofdoel van hierdie navorsingsverslag is om te bepaal of die toesighoudende stelsel van die Sentrale Bank van Liberie (hierna verwys na CBL) toereikend is om doeltreffende en doelmatige banksupervisie te verskaf wat stabiliteit in die finansiële stelsel sal verseker. Stabiliteit in die finansieie sektor, en die veiligheid en betroubaarheid van die bankbedryf is uiters belangrik as gevolg van die verwantskap met alle ander sektore van die ekonomie. Voldoende supervisie en verstandige regulasies vorm die kern van stabiliteit in die finansiële sektor. Hierdie navorsing is gerig op die verstandige regulasies en ander toesighoudende bepalings wat gebruik word in die supervisie van gelisensieerde bank-finansiële instellings ten opsige van kapitaaltoereikendheid, bategehalte, bestuur, verdienste, likiditeit en sensitiwiteit ten opsigte van markrisiko, die benadering tot toesighouding en die regsraamwerk. Die toereikendheid van die verstandige regulasies en ander toesighoudende bepalings word bepaal deur dit met internasionale standaarde te vergelyk. Die resultale toon aan dat die verstandige regulasies grootliks aan internasionale standaarde voldoen. Die toesigboudende stelsel is dus toereikend en daartoe in staat om stabiliteit aan die bankbedryf te verskaf. Banke word blootgestel aan verskeie soorte risiko in die uitvoer van hul handelsbedrywighede. Daar word dus van die bestuur verwag om 'n kapitaalbasis te handhaaf wat die aard en omvang van die risiko vir die bank sal dek. Die kapitaal bestaan uit twee vlakke: Vlak I (primêre) kapitaal en Vlak 2 (sekondêre) kapitaal. Daar word van banke verwag om permanent 'n kapitaaltoereikendheidsverhouding te handhaaf wat ooreenkom met hul totale blootstelling aan risiko op 'n vlak van ten minsle 8%. Die verstandige regulasies van die Sentrale Bank van Liberie plaas bates in twee risiko-mandjies terwyl internasionale organisasies soos die Bank for International Settlement vier tot vyf risiko-mandjies het wat op die kategorie van die lener, selfbesturende entiteit, bank of korporasie gegrond is. Opbrengsgewende bates dui op die bank se gehalte en bestaande potensiaal vir blootstelling aan teenpartye wat verband hou met lenings- en beleggingsportefeuljes sowel as buitebalanstransaksies. Daar word van banke verwag om toereikende voorsiening teen verslegtende leningsportefeuljes te maak en om algemene voorwaardes vir presterende lenings te stel. Betroubare en bevoegde bestuur is die heel belangrikste vereiste vir die krag, vermoë en groei van enige finansiële instelling. Aanwysers van die gehalte van die bestuur se bevoegdheid is hoofsaaklik op individuele instellings van toepassing. Verder is dit nie maklik om enige gevolgtrekking ten opsigte van 'n bestuur se betroubaarheid te maak op grond van monetêre aanwysers nie, omdat die kenmerke van 'n goeie bestuur eerder kwalitatief van aard is. Sterk opbrengste en winsgewendheidsprofiele van 'n finansiële instelling dui op sy kapasiteit om verliese te absorbeer, fondse uit te brei, mededingend in die bankbedryf te wees, sy kapitaalbasis aan te vul en/of te vergroot, en dividende aan aandeelhouers te betaal. Bankinstellings maak staat op goeie opbrengsgehalte as hul eerste verdedigingslyn teen kapitaalvermindering as gevolg van kredietverliese, rentekoersrisiko's, bedryfsrisiko's en 'n afname in batewaarde. Likiditeit word dikwels beskou as 'n bevestiging van solvensie vir bankinstellings. Banke moet 'n minimum vlak van likiditeit handhaaf om verpligtinge soos onttrekkings na te kom en om lenings toe te staan. Likiditeit is 'n sterk vroeë waarskuwingsteken, en die tekort en/of gebrek daaraan knou openbare vertroue in die bank. Banke moet waak teen 'n strukturele wanafstemming van looptye. Onverstandige uitleenpraktyk verhoog 'n bank se blootstelling aan likiditeitsrisiko. Alle gelisensieerde banke word statutêr verplig om 'n minimum daaglikse likiditeitsverhouding van 15% te handhaaf, wat 'n maatstaf is van 'n bank se likiede bates teenoor deposito's. 'n Toepaslike regsraamwerk is 'n voorvereiste vir doeltreffende banksupervisie. Daar kan van toesighouers verwag word om sonder enige politieke druk op te tree slegs indien hulle nie afgedank kan word omdat hulle hul plig doen nie. Die New Financial Institutions Act van 1999 en die Central Bank Act van 1999 gee aan die Sentrale Bank die mag om banklisensies toe te staan en herroep, om toesig oor kommersiële banke te hou en om onbeperkte toegang tot beskermde inligting te kry. Daar is 'n behoefte om die toesighoudende kapasiteit deur die verskaffing van deurlopende korttermynopleiding en langtermyn- of nagraadse studie uit te bou.

The authors’ outline of the evolution of the banking sector development assesses governmental approaches to bank regulation and supervision and is a basic regulatory frame-work, needed to reduce bank failures; it characterises steps of the evolution of the banking sector and trends of its development. The discussion focuses on: 1. Initial forming and restructuring of the banks, changes in the commercial banking sector and the reorganising of the banking systems; 2. Change of the role of the national bank and the mode of its intervention; 3. Dynamics of the banking system development in Georgia and the risks of banking activities. The main findings suggest that 1. The Georgian banks overcame the crisis of the 90’s because of having portfolios of assets in foreign currencies and performing of the national banks function in the “lender of last resort”; 2. Regulatory and supervisory practices in Georgia develop from strict regulations to a deregulation that is most effective in promoting good performance and stability in the banking sector; 3. Alongside with the increase of banking concentration and openness the banking competition and financial risks boost too; that could be managed by further development of institutional reforms in the banking sector. There is an assess of the development and weakness of the banking sector. / Entwicklung des Bankensektors in Georgien