The regulation of deposit-taking financial institutions : a comparative analysis of the United Kingdom, Germany and South Africa

[摘要] ENGLISH ABSTRACT:Standard financial literature contains various explanations for the unique role ofdeposit-taking intermediaries in an economy. None of these reasons adequatelyexplains the extensive degree of banking regulation evident in practice.The nature of a deposit, which guarantees capital repayment independent of bankperformance, uniquely incentivises banks to be exposed to financial risks. In theabsence of appropriate regulation, banks may be tempted to assume anunacceptably high level of risk that could ultimately result in bank failure. Thus, theregulation of banking risks is justified in terms of the public interest theory wherebybanking regulation seeks to avoid the market imperfections arising from informationalasymmetries and domino externalities associated with bank failure. Accordingly, therationale of banking regulation lies in the protection of consumers and in preservingthe stability of the financial system. Direct monetary controls, on the other hand,impact adversely on the risk-management activities of banks.The framework utilised to analyse and compare banking regulation consists of threebroad categories namely: preventative regulation, protective regulation and monetaryrequirements.Preventative or prudential regulation is aimed at managing the levels of risksassumed by banks. This form of regulation relates to entry requirements; limitationson certain business activities; the disclosure of risk-related information; the adequacyof capital resources; portfolio restrictions on risk assets; and the sufficiency ofliquidity.Protective regulation is concerned with the immediate protection of depositors andmaintenance of overall financial stability once a bank has failed. lt consists of crisismanagement measures and deposit insurance schemes.Direct, and hence inappropriate, monetary requirements are variations in reserveasset requirements, as well as interest rate and credit controls.The banking systems of South Africa, the United Kingdom and Germany werechosen to perform a comparative analysis of financial regulation.The London financial markets are mature and a large variety of banks are regulatedin a flexible manner by the Bank of England. By contrast, the strictly regulatedGerman banks dominate their domestic financial system. South Africa is a hybrid ofthe former systems with a modern banking industry operating in well developedfinancial markets and supervised according to advanced risk-managementconsiderations.The analysis of preventative and protective regulation in all three financial systemsindicates that banking regulation is indeed concerned with the regulation of banking risks. The efforts of the Bank for International Settlements to harmonise regulationacross domestic financial systems has contributed significantly to improvedregulatory techniques for the management of these risks. None of the three systemsmake use of direct monetary requirements which suggest awareness of the costsassociated with such regulation.A number of recommendations are made to improve financial regulation in SouthAfrica: extension of regulatory coverage to include other types of financialintermediaries who also engage in risky activities; further relaxation of exchangecontrol regulations which restrict the foreign exchange risk management; theadoption of a formal deposit protection scheme; increased consolidated supervisionby a single regulatory authority with executive powers; further deregulatory measuresin instances where regulations are not appropriate from a risk-managementperspective; and re-regulation to the extent that the risk-management activities canbe regulated more efficiently.

[发布机构] Stellenbosch University