Financial capital regulation drives almost every aspect of the financial markets, from the structures of financial groups and the way they raise capital, as well as the development of investment structures and financial engineering such as derivatives, securitizations, structured finance, credit derivatives, repos and stock lending. Capital regulation is a little studied area of law. This book provides an introduction to the structure of bank financial regulation for financial lawyers and other non-statisticians interested in the regulatory drivers which shape modern financial transactions and techniques. Although the regulations are based on complex statistical models, the legal and regulatory principles which underlie these regulations are capable of being articulated without formulae and in a structured fashion. Basel II has introduced a wholly new structure for bank financial regulation, and requires banks worldwide to re-examine their structures, activities and business models. It will result in both substantial change in regulatory structures and a significant increase in the complexity of those structures.
The focus of the work is on the general principles set out in the Basel II and on the implementation of those principles in the EU through the Capital Requirements Directive. It is therefore of direct relevance to readers in all EU and most non-EU significant financial jurisdictions. Providing a clear and comprehensive introduction to the regulatory drivers shaping financial transactions, this work is an accessible guide for lawyers and bankers.
Table of Contents
I. THE ELEMENTS OF BANK FINANCIAL SUPERVISION; 1. Introduction to Banks and Banking; 2. Why are Banks Supervised?; 3. International Bank Regulation; 4. The Bank Capital Calculation; II COMMERCIAL BANKING; 5. Credit Risk; 6. The Standardized Approach; 7. Model Based Approaches to Risk Weighting; 8. The Internal Ratings Based Approach; 9. Netting, Collateral, and Credit Risk Mitigation; III INVESTMENT BANKING; 10. The Trading Book; 11. Securities Underwriting; 12. Trading Book Models; 13. Credit Derivatives in the Trading Book; 14. Counterparty Risk; 15. Counterparty Credit Risks for Derivatives, Securities Financing, and Long Settlement Exposures; 16. Securitization and Repackaging; 17. Operational Risk Requirements; 18. Concentration and Large Exposures; 19. Liquidity; IV BANK GROUP SUPERVISION; 20. Group Supervision; 21. Financial Conglomerates; 22. Cross-border and International Supervision of Bank Groups; 23. Pillar Three - Disclosure Requirements