“But we are different!”: 12 Common Weaknesses in Banking Laws, and What to Do About Them
IMF Working Papers, September 10, 2015
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- “But we are different!”: 12 Common Weaknesses in Banking Laws, and What to Do About Them
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Bibliographic details
- Authors: Wouter Bossu, Dawn Chew
- Published: September 10, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513586458.001
Summary
- Well-designed banking laws are critical for regulating the market access and operations of banks, as well as their removal from the market in case of failure.
- At a financial policy level there is a broad consensus as to the content of banking laws, but from a legal perspective their drafting often leaves something to be desired.
- The types of weaknesses of banking laws are hardly country-specific; many weaknesses are shared by many banking laws.
- This working paper discusses those weaknesses and ways to remedy them, by focusing on a selected set of legal policy principles.
Major themes and substantive findings
- Common weaknesses in banking laws recur across jurisdictions rather than being country-specific.
- Weak drafting at the legal level can undermine otherwise sound financial policy consensus on banking law content.
- Remedying weaknesses requires alignment of legal drafting with accepted legal policy principles relevant to bank regulation, market access, operations, and exit/removal processes.
Policy recommendations and focus areas
- Emphasize legal drafting that reflects established legal policy principles for banking regulation.
- Address weaknesses across these areas:
- Bank legislation and licensing
- Banking regulation and supervision
- Consolidated banking supervision
- Removal of banks from the market in case of failure
- Consider cross-cutting principles such as clarity of authority for licensing and supervisory action, and legal tools for handling problem bank situations.
Keywords and subjects covered
- Subjects: Bank legislation, Bank licensing, Banking, Basel Core Principles, Consolidated banking supervision, Financial regulation and supervision, Legal support in revenue administration, Revenue administration
- Keywords: Bank legislation, Bank licensing, Banking Regulation, banking supervisor, Basel Core Principles, civil law, Consolidated banking supervision, Global, home supervisor, Legal support in revenue administration, lending bank, licensing authority, party rule, party transaction, Policy Analysis, problem bank situation, supervisory authority, WP