Necessary Banking Changes To Prevent Another Global Financial Crisis

2120 words - 9 pages

Question 1
Financial crisis that affected globally became the greatest shock to the world financial system and financial markets of USA and Europe was mainly affected. Underlying weaknesses in financial regulations were considered as one of causes of Global Financial Crisis. As regulations are blamed in current (2007-2008) crisis it should be taken under consideration that cause lies in Basel I and Basel II. However Basel II was not fully implemented before crisis since it was entered into force in January 2008 in EU and since April 2010 in US. (The de Larosiere Group, 2009). Moreover, if Basel II had fully implemented it could help to prevent the crisis or at least to mitigate it but after cause researches Basel III measures were designed in terms of liquidity, leverage and capital to protect the economy from crisis. Global standards under Basel III must be fully implemented by 2019. Based on www.basel-iii.worldfinance.com “Basel III and related measures by national and supranational regulators will force the banks to save a much bigger capital base – in effect, a foundation stone of solid assets designed to withstand sudden market disruption. In general Basel III will force banks to become smaller relative to the size of their national economies. Lower levels of leverage – the ratio of capital to assets – will become obligatory. And they must have greater stores of spare cash on hand to tide them over temporary difficulties therefore nowadays banking industry is facing challenging times. Regulation is one part but important part is compliance. As per Forbes.com these complex and interrelated challenges will be central to banks’ ability to regain and maintain high performance. “However, Forbes.com believe that for banks and other financial institutions to achieve high performance in coming years, they will need to transform their operations and structures while addressing three significant and inter-related challenges in parallel:
1. Increasing profitability and lifting returns on equity.
2. Simplifying infrastructures that are too complex and costly for current operations.
3. Effectively implementing far-reaching and complex new regulations.

The "to do list" for banks imposes. At least, financial services the companies will need to adjust effective management for the regulatory programs; transformations and alignments of finance and risk of functions; update the current client on - boarding and data collection processes; to establish closer framework for operational risk, and also to develop management plans for crisis. Besides, norms impose the strong efforts directed on control of financial crimes, including anti-money fights and development of decisions on compliance with the Law on the taxation of foreign accounts of compliance (FATCA). They cover expanded structures of the reporting and the new processes of Know Your Client (KC), and will demand the considerable volume of investment and resources for both American and non...

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