Catalog

	Table of Contents
p. 24 of 58 BACK | NEXT Purpose and Structure of the Toolkit Part One: Introduction and Overview Part Two: Preconditions and Infrastructure for Financial Sector Development Part Three: Financial Regulation and Supervision I. Financial Stability, Development and Institutional Design II. Financial Regulation: General Principles III. Financial Regulatory Structure IV. Banking Regulation V. Bank Insolvency and Depositor Protection VI. Securities and Derivatives Regulation VII. Insurance and Pensions Regulation VIII. Regulation of Financial Conglomerates Part Four: Regional Financial Integration Part Five: ADB's Intervention in the Financial Sector Bibliography Glossary and List of Abbreviations Acknowledgements

Financial Sector Legal and Regulatory Toolkit

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Part Three: Financial Regulation and Supervision

Weak financial intermediaries and problems with financial regulation and supervision have been significant factors surrounding the developing countries debt crises and the United States savings and loan crisis in the 1980s, the collapse of the Bank of Credit and Commerce International (BCCI) of Pakistan and Barings Bank of England, and the Mexican [ PDF ] and East Asian [ PDF ] financial crises in the 1990s, and the current global financial crisis. These various problems have led to a wide range of international efforts directed towards supporting financial stability. In analysing the root causes of the crisis, the G-20 stated as follows:

During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excess leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions.

Major underlying factors to the current situation were, among others, inconsistent and insufficiently coordinated macroeconomic policies, inadequate structural reforms, which led to unsustainable global macroeconomic outcomes. These developments, together, contributed to excesses and ultimately resulted in severe market disruption.

As a result of the global financial crisis, the G-20 and FSF are focusing on improving international financial regulation and international financial regulatory standards across most areas.

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