EFECTOS O CONSECUENCIAS DE LA POCA IMPORTANCIA QUE LE DAN LOS DOCENTES A LAS REGLAS ORTOGRÁFICAS.
PARA QUÉ ESTUDIAMOS PRECEPTIVA LITERARIA?
The era of financial liberalisation that swept through Europe and other industrialised western countries resulted in an increasing state of cross-border integration253 between banks and financial markets.
It is submitted that this increasing cross-border integration of banks and financial markets was not supported by any form of cross-border banking supervisory framework. The lack of international co-operation and co- ordination amongst banking regulators and supervisors was highlighted by Peter Cooke254 who stated that:
‘………..no banking regulators knew anything at all about the banking regulations prevailing in other countries before the 1970s. Prior to 1975,
248 Walker (n246). 249 ibid. 250 ibid. 251 ibid. 252
In a market-led self-regulatory environment, market participants through a code of conduct, adhere to a particular practice, custom or norm in a consistent manner thus creating an impact which could be likened to the desired impact, had the practice or custom been embodied in a regulatory framework.
253 S Ingves ‘The Evolution of the Basel Committee’ – A speech/keynote address to celebrate 25 years of the Basel Capital Accord, 26 September 2013.
254
Former Chairman of the BCBS and is the longest serving chairman of the Basel Committee from 1976 to 1988.
regulation was nationally prescribed within national legislatures and without international co-operation from other jurisdictions’255.
Despite this lack of international co-operation from other jurisdictions, it took the failures of the Franklin National Bank and the Bankhaus Herstatt bank for the international community i.e. members of the G10 to address the issue of the need for an international banking framework. This resulted in the formation of a Committee on Banking Regulations and Supervision towards the end of 1974.
This Committee, which was later renamed the Basel Committee on Banking Supervision was given the mandate of establishing ‘regular co-operation between its member countries on banking supervisory matters’256
. On 26 September 1975, the Basle Committee introduced a Concordat257 of international banking supervision to address the issue of lack of co-operation amongst jurisdictions. The Concordat made it absolutely clear in its introductory paragraph that its objective was to establish guidelines which could define the scope of the co-operation amongst national banking supervisors in the supervision of foreign banks operating within their jurisdictions. The Concordat also introduced guidelines which clarified the supervisory function and requirements of both host and parent banking authorities.
Throughout the subsequent revisions of the Basel Concordat; first in 1983, then in April 1990 and July 1992, the Basel Committee has continually acknowledged the internationalisation of banking and capital markets258.
Perhaps the most significant revision to banking supervision by the BCBS which characterised the international banking regulatory framework at the
255 Atul K Shah, ‘The Dynamics of International Banking Regulation’, 1996 Journal of Financial Regulation & Compliance, Volume 4(4) 371.
256 Basel Committee on Banking Supervision: ‘A Brief History of the Basel Committee’ October 2014 Bank for International Settlements, p1 (Accessed on February 9 2015).
257 ‘A Report to the Governors on the Supervision of Banks’ foreign establishments’ – BS/75/44e, p1.
258
time was the introduction of the 25 basic core principles that underpin the Basel Committee’s banking and regulatory framework259.
Further to the general recognition within the BCBS of the need to improve the international supervision of banks and to enhance co-operation and harmonisation amongst banks particularly within Europe, the BCBS also recognised that a harmonisation of banking regulations within the European Community could be better achieved through the introduction of ‘standard rules’ on capital adequacy260. These ‘standard rules’ on capital adequacy are introduced under the minimum capital requirement under the Basel 1 Capital Accord, and although the Basel Committee’s recommendations and decisions are not legally binding261, they have been adopted by over 100 countries world-wide including African countries such as Ghana and Kenya.
Inspite of this compliance statistic, the submission is made that whereas the justification for the regulation of banks within national borders may easily be forthcoming and acceptable, the rationale for the international regulation of banks might arguably not enjoy the same support. Notwithstanding this, the justification for the international regulation of banks has increasingly over the years become difficult to disregard.
While the need for an international banking regulatory framework is increasingly becoming justifiable, it must be appreciated that deeply rooted and potentially divergent national laws which split along common law and civil law trajectories may well provide a spanner in the wheels of efforts being made to harmonise global banking regulation and supervision.
This common law, civil law dichotomy subsequently compounded by the potentially different interpretations accorded by jurisdictions to global banking regulations often results in regulatory arbitrage which if left unchecked may encourage banks to move to jurisdictions in which banking regulations and supervision are relatively softer and less intrusive.
259 The Basel Committee on Banking Supervision, ‘Core Principles for Effective Banking Supervision’ (September 1997).
260
A K Shah (n255) 373. 261
Basel Committee on Banking Supervision: A Brief History of the Basel Committee October 2014 Bank for International Settlements: (Accessed on February 9 2015) or see www.bis.org
The disparity in the banking regulations and supervision procedures in countries worldwide was acknowledged by Sahajwala and Van Der Bergh262 who suggested that differing banking regulations and supervision procedures amongst countries could be attributed to the fact that each country had attained varying levels in the state of development263 and complexity of their respective financial systems which was matched by the varied levels of openness of the domestic financial system and its exposure264 to the level of competition that foreign bank competitors would bring or introduce. Other reasons suggested were that the disclosure process and extent of disclosure of a bank’s financial position, together with the varying levels in availability of technology and human resources also enhanced inconsistencies in banking regulations and supervision and were also a contributory factor.
While the ‘number, size and concentration of banking institutions’ are cited by Sahajwala and Van Der Bergh as yet another contributory reason to the variation in banking regulations worldwide, it is also an acknowledged fact, that the size and level of inter-connectedness of banking institutions and non- banking institutions have led to an increase to any financial system of the risk/threat posed by shadow banking to financial stability, particularly where non-banking financial institutions are concerned265.
Notwithstanding the reasons given by Sahajwala and Van Der Bergh, there had been prior recognition of the need for the harmonisation of national bank regulations amongst industrialised nations towards the end of the 1980s and early 1990s. This was due to the fact that banks had started to develop an international presence and were no longer confined within their own local borders. The idea of foreign banks operating within national jurisdictions was no longer an unwanted proposition266.
262 R Sahajwala and V Bergh, ‘Basel Committee on Banking Supervision: Risk Assessments and Early Warning Systems 2000’, Working Paper No4 pp1-45.
263 ibid, 2 264
ibid.
265 R Lastra, ‘Systemic risk, SIFIs and Financial Stability’, (2011) Capital Markets Law Journal Volume 6, 197.
266
Despite the increase in the presence of foreign banks in most jurisdictions, some countries have in place, laws which either prevent the establishment of foreign banks or restrict their numbers and activities in countries where they are given the license to operate. The UK and
Maximillian J.B. Hall and George Kaufman suggest in their article267 that the call for harmonisation in banking regulations was an attempt to reduce the likelihood of bank failures and the systemic risk contagion that followed thereafter, and that such harmonisation was unlikely to encourage certain acts by governments which placed certain countries at a competitive advantage than others. They suggest further that such desire, led governments to ‘call for a transnational regulation’268which would address the limitations of the market disciplines exhibited by banks in many countries, and the inability of private stakeholders and other government bank regulators to monitor their interests in their banks located in other jurisdictions.
Today, whilst several global banks have been entering Africa e.g. from China and perhaps the UK, due to the existence of foreign investment laws that make it easier for these banks to open branches/offices/subsidiaries, not the same could be mentioned for banks in Africa wishing to open branches in say Europe269.
It is submitted, that today the arguments in favour of the international regulation of banks is difficult to dismiss or ignore but nonetheless must be weighed against the argument in legal jurisprudence of the sovereignty of a State and the accordance of recognition to the individual characteristics of each national culture270. It is the strength of such national cultural identity that often leads to some level of bias in favour of national laws or regulations as opposed to harmonisation of regulations271. This view is opposed by Universalists, who align themselves to the view that ‘universal legal principles would one day govern all of humanity’272.
Kenya are examples of countries where the presence of foreign banks are actually encouraged.
267 M J B Hall and G G Kaufman, ‘International Banking Regulation’, A Paper presented at a conference titled Structural Foundations of International Finance held at Saint Mary’s University, Halifax, Nova Scotia on May 10-11, 2002.
268 ibid. 269
It is admitted, that this could also be attributed to the lack of funds or trained personnel. 270 M Van Hoeke and M Warrington, ‘Legal Cultures, Legal Paradigms and Legal Doctrine: Towards a New Model for Comparative Law (1998), International and Comparative Law Quarterly Volume 47, 495.
271 G Del Vecchio, ‘Science of Universal Comparative Law’ [1910] in A Kocourek and J Wigmore (eds), Primitive and Ancient Legal Institutions [1915], 61-70 Boston: Little Brown. 272
The Universalist ideology273, often cites ‘a number of phenomena’ as justification in the optimism they have such as the ‘convergence of national laws towards common principles’ and the frequency with which legal institutions created in one system are adopted by another274.
In a recently held conference in London275, Dr David Bholat from the Bank of England stated ‘Culture eats law for lunch’. He explained by suggesting that he was unsure if regulation alone could improve the current situation in the banking industry because ‘we have had regulations since 1979, i.e. statutory- based regulation yet still we seem to be having the same problem’276. While one might argue that Dr Bholat’s statement was somewhat limited to the UK Banking Industry, there are legal experts277 who have criticised the Basel Accords, particularly Basel 2 for its failure to prevent the global financial crisis. The phrase used by Dr Bholat together with the discussions that followed, prompted Professor Joan Loughrey to suggest that ‘If regulations do not seem to be working, what else would? Should there be a mix of principles-based regulation and culture?’278
It is submitted that such an approach will be unworkable due to the strong banking cultures that exist in certain jurisdictions like the U.S.A and the U.K. where very powerful bank lobbyist groups thrive. Indeed, Professor Joanna Gray warns of the possibility of ‘regulatory capture’279 if the banking industry is
273
M Van Hoeke and M Warrington (n270). 274
Perhaps the creation of the EU may arguably be construed as a work in progress towards governance under ‘universal legal principles’.
275 The theme of this conference was ‘My Word is My Bond: Regulating for Integrity in the City’ a one-day conference organised by the University of Leeds together with the Centre for Law, Markets and Regulation on 15 January 2013 at the London offices of Allen & Overy LLP. 276 A verbatim extract from Dr. Bholat’s speech at the Conference, ‘My Word is My Bond: Regulating for Integrity in the City’ on 15 January 2013.
277 E Avgouleas, ‘Rationales and Designs to Implement an Institutional Big Bang in the Governance of Global Finance’ Seattle University Law Review (2012) Vol 36 321, 363-365. See also, C Brummer, ‘Why Soft Law dominates International Finance - and not Trade’ (2010) Journal of International Economic Law Vol 13(3) 623.
278 A verbatim extract from Professor Joan Loughrey’s presentation at the Conference ‘My Word is My Bond: Regulating for Integrity in the City’ on 15 March 2013.
279 A verbatim extract from Professor Joanna Gray’s presentation at the Conference, ‘My Word is My Bond: Regulating for Integrity in the City on 15 January 2013.
constantly allowed to lobby the regulators resulting in the ‘watering down’ of the regulations280.