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Historically, capital has employed varied methods, both discursive and material, to bypass regulatory frictions. Regulatory arbitrage is one such corporate tactic; it leverages more favorable regulatory regimes in one jurisdiction or category to avoid stricter regulation in another, thus reducing regulatory costs. While regulatory arbitrage underpins much of the gig economy's development, it has received scant attention in critical studies of digital media. Using mixed methods of documentary research and expert interviews, this article examines the regulatory arbitrage strategy that the Chinese social media giant ByteDance deploys in its global expansion and sheds light on the intricate tech politics occurring between the firm and national regulators. Rather than interpreting ByteDance's global foray through the prevailing geopolitical lens, which often posits a simplistic, antagonistic framework, this article demonstrates how the firm manages and adapts its structure to exploit more lenient regulatory regimes outside of China, such as that in the US. This allows ByteDance to reach deeper into the global market and avoid potential breaches of China's internal political economic control. Consequently, the article emphasizes the cunning, resilient nature of capital and the complexity and intricacies in global flows of capital, characteristics often overlooked in an increasingly geopolitically charged world, and it considers their implications for platform governance. [ABSTRACT FROM AUTHOR]

The relevance of this study is driven by the increasing dynamics of contracts concluded between the Republic of Kazakhstan and the People's Republic of China, as well as the lack of research on the comparison of contractual legal structures between the two countries and their criminological implications. The purpose of this study is to conduct a comparative analysis of the contract legislation of China and Kazakhstan, identify common and distinctive features, and explore the criminological impacts of these differences. The study reveals that the contract law of China and Kazakhstan share some similarities, such as the concept of a contract and the basic principles of contractual relations. The differences between the two countries' contract law and enforcement approaches highlight the importance of the legal environment in shaping the behaviour, risk assessment, and decision-making processes of parties involved in contractual relationships. [ABSTRACT FROM AUTHOR]

The risk of lending money collected from savers is that it leaves banks liable to default with depositors if events (and hence repayment demands) become 'abnormal'. Even though international and national regulation has been introduced to ensure that a certain level of capital is retained by banks, such regulation can be subverted. The current system of international regulation based on the Basel III agreements does not stipulate a standardised approach for inspection frequency or penalty magnitude. This leaves the potential for regulatory arbitrage. The scientific value of an analysis to optimise regulatory efficiency and reduce such arbitrage is therefore considerable. This work therefore assesses the results of the empirical testing of a model based on the Von Neumann–Morgenstern utility function and consequently proposes that this model be used as a basis for standardising capital adequacy limit infraction penalties on an international level to prevent regulatory arbitrage. A survey is undertaken in order to test the responses of participants on the level of penalty which would deter them from regulatory transgression under different theorised levels of profit and probability of discovery. Based on the responses of two distinct subject groups ('bankers' and 'non-bankers') in different scenarios of hypothetical capital adequacy violation, the Von Neumann–Morgenstern utility function is reviewed against empirical results and revealed to show a semi-strong correlation. Lastly, the analysis reveals the striking similarities of the two groups' responses, posing regulatory implications for the industry. [ABSTRACT FROM AUTHOR]

Testing emerging technologies, such as autonomous vehicles, predictive crime analytics, and smart city interventions under real-world conditions is an important strategy for robust and responsible technology development. However, the moral responsibilities of researchers towards the public when conducting such real-world experiments are often left unaddressed and unregulated. This article argues that there are problematic inconsistencies in research ethics demands and protections across different categories of research and development with emerging digital technologies. This differential treatment is problematic since there are no meaningful differences to justify it, and it creates the possibility of regulatory evasion at the cost of populations’ due protection. Hence, I argue that this differential treatment should be amended by harmonizing research ethics demands. In doing so, this paper contributes to several ongoing scholarly debates on the limits of current research ethics guidelines and protocols in the face of novel technologies and research formats.

We estimate the willingness-to-pay to bypass a loan-to-value (LTV) cap. Our identification relies on exogenous variation in debt exempt from the LTV regulation that can only be used as a substitute for a personal mortgage. Our baseline estimate reveals that homebuyers pay 7.3 Swedish Kroner (SEK) to avoid 1 SEK of equity down payment. The supply of debt not part of the LTV calculation increased by approximately 50% within 2 years after the LTV regulation. Financially weaker households drive the results. [ABSTRACT FROM AUTHOR]

China is one of the pioneers in developing innovative models for credit business through a partnership between FinTech firms and traditional financial institutions such as banks. There are two main business models of FinTech-bank partnership, namely the loan facilitation model and the co-lending model. While this partnership brings many benefits, it has significant risks, including outsourcing risks, monopolistic practices, data protection, algorithmic bias, and financial systemic risk. This paper critically examines the Chinese regulatory responses to those risks with a focus on the outsourcing issue. Drawing upon the experiences of some overseas jurisdictions, including the US, the UK, the Netherlands, Luxembourg and Switzerland, this paper makes relevant suggestions for improving the Chinese regulation. China is advised to adopt a staged and differentiated approach to regulate FinTech-bank partnership. The first step is to establish a regulatory sandbox for FinTech firms to test their innovative activities, and, depending on the specific circumstances, an umbrella entity mechanism could also be introduced. Further, a sophisticated licensing regime can be established to set out differentiated rules for FinTech firms according to the nature and extent of the FinTech-Bank partnership, thus addressing the problem of regulatory arbitrage. [ABSTRACT FROM AUTHOR]

The risk of lending money collected from savers is that it leaves banks liable to default with depositors if events (and hence repayment demands) become ‘abnormal’. Even though international and national regulation has been introduced to ensure that a certain level of capital is retained by banks, such regulation can be subverted. The current system of international regulation based on the Basel III agreements does not stipulate a standardised approach for inspection frequency or penalty magnitude. This leaves the potential for regulatory arbitrage. The scientific value of an analysis to optimise regulatory efficiency and reduce such arbitrage is therefore considerable. This work therefore assesses the results of the empirical testing of a model based on the Von Neumann–Morgenstern utility function and consequently proposes that this model be used as a basis for standardising capital adequacy limit infraction penalties on an international level to prevent regulatory arbitrage. A survey is undertaken in order to test the responses of participants on the level of penalty which would deter them from regulatory transgression under different theorised levels of profit and probability of discovery. Based on the responses of two distinct subject groups (‘bankers’ and ‘non-bankers’) in different scenarios of hypothetical capital adequacy violation, the Von Neumann–Morgenstern utility function is reviewed against empirical results and revealed to show a semi-strong correlation. Lastly, the analysis reveals the striking similarities of the two groups’ responses, posing regulatory implications for the industry.

We study how banks' year-end window dressing affects the identification of global systemically important banks (G-SIBs) and their capital requirements. Some G-SIBs reduce their balance sheet at year-end, especially their derivative books and intra-financial system exposures, to an extent that they can reduce their requirements or avoid G-SIB designation. While window-dressing G-SIBs benefit from lower funding costs during normal conditions, they face tighter funding constraints and increased systemic risk during stress episodes. Supervisory judgement is thus crucial in assessing G-SIBs, and greater use of average as opposed to point-in-time data in regulation is recommended to mitigate window dressing incentives. [ABSTRACT FROM AUTHOR]

This paper examines bank liquidity management following capital shocks under capital and liquidity regulation in a period of unconventional monetary policies. Studying European banks between 2010 and 2018, we find that bank liquidity is generally not affected by a negative capital shock. Capital shocks are nevertheless transmitted into liquidity positions through balance sheet adjustments. Addressing bank-level balance sheet policies, we find that the banks de-risk assets by replacing corporate loans with financial securities, especially if the shock takes place during periods of heightened central bank interventions. Moreover, asset-side-dominant risk-reducing behavior goes against regulatory intent and indicates that regulatory arbitrage considerations affect banks' responses to shocks. Finally, we document heterogeneous responses by banks depending on their size, type, and country. These findings imply that compliance with regulation may lead to partial shortages in corporate lending, with banks prioritizing investment in government securities in event of a capital shock. [ABSTRACT FROM AUTHOR]

The article provides a mappping of scientific debates on platform work, focusing on their concepts. The growth of platform work has produced a number of scientific contributions worldwide. In this review, we are interested in how scholars process their 'raw material' and how they define their 'object of knowledge' when they challenge the self-image of platforms as 'technological enterprises', supposedly a net result of automation, robotization, the sharing economy and the fourth industrial revolution. The review has identified five key concepts for understanding work in ICT-driven environments: platform urbanism, digital Taylorism, regulatory arbitrage, planetary labour markets and heteromatised labour. In the conclusion, we present the echo of these debates in social responses. [ABSTRACT FROM AUTHOR]

The transformation of the modern global monetary and financial system involves the elimination of institutional and functional contradictions existing at various levels. Some contradictions arose as a result of the asymmetric development of the global financial market (GFM). The aim of the article is to substantiate the asymmetry of the GFM development as an organic phenomenon, which, on the one hand, becomes a serious obstacle to the functioning and progressive development of the world economy, and, on the other hand, is the driving force behind this development. The authors apply general logical, theoretical, empirical, and special research methods. The origins of the asymmetric development of the GFM are determined. Endogenous and exogenous factors of GFM asymmetry were revealed. The article considers examples of asymmetry in various GFM segments. The negative impact of the global financial and economic crisis of 2008–2009 and the coronavirus pandemic on increasing the asymmetry of the GFM development has been determined. Based on the analysis of the key macroeconomic indicators of the top 20 countries in terms of GDP, the asymmetric nature and the absence of stable patterns that determine the country’s position in the world ranking are revealed. The authors conclude that the asymmetry of the GFM development is an organic phenomenon, caused by a wide range of causes of endogenous and exogenous nature. Endogenous asymmetries can be partially compensated either through complete economic isolation, which is likely to lead to a slowdown in development and lagging behind other countries in the future or through active involvement in a system of world economic relations based on fair partnerships. Exogenous asymmetry, due to the peculiarities of the historically established world order, is destructive for all participants in the global economic system, including those whose interests must be protected in the first place.

This article considers the benefits and pitfalls of international human rights law as a component of artificial intelligence (AI) governance initiatives. It argues that (1) human rights law can serve as an authoritative resource for providing definitions to highly contested terms such as fairness or equality, (2) it can be used to address the problem of international regulatory arbitrage, and (3) it provides a framework to hold public and private actors legally accountable. At the same time, the paper considers recent critiques of human rights law and its application to AI governance, such as (1) lack of effectiveness; (2) inability to effect structural change, and finally, (3) the problem of cooptation. The article argues that while there is room for international human rights in the realm of AI governance, we should look to it with tempered expectations as to its promises and limitations.

We set up a general equilibrium model of Chinese wealth management products (WMPs), which are deeply rooted in traditional Chinese commercial banks. According to this model, we proposed two hypotheses, namely, the regulatory arbitrage and information asymmetry hypotheses. We tested the hypotheses by using data on Chinese WMPs during the 2006–2015 period. We found that regulatory arbitrage was the main driver of WMPs’ rapid expansion. The greater the pressure from regulation was, the greater the incentive for commercial banks to issue off-balance sheet WMPs and take risks. When the regulatory standard became strict or loose, the effect of regulatory arbitrage on marginal risk-taking behavior became reinforced or reduced, respectively. We also argue that transparency can moderate drive-up behavior. Some relevant suggestions are provided for solving the problems of overexpansion and risk-taking behavior according to the results.

FinTech lenders offer an opportunity to enhance credit access but may also disrupt traditional banking. This study proposes a theoretical framework for analyzing the net impact of FinTech's entry on access to credit in credit markets dominated by conventional banks. When a FinTech lender enters the market, competition intensifies, which reduces the bank's gain in serving certain customer segments. While FinTech lending can help serve some unattended niches, it may cause the bank to abandon others, leading to an ambiguous or even negative impact on access to credit. • FinTech are Lenders who make extensive use of the latest technology. • FinTech can reach more small businesses due to their alternative technology. • FinTech may stop banks from reaching clients due to higher market competition. • FinTech's entry does not guarantee increased access to credit for small businesses. • FinTech's entry can result even in the reduction of credit for small businesses. [ABSTRACT FROM AUTHOR]

This article considers the benefits and pitfalls of international human rights law as a component of artificial intelligence (AI) governance initiatives. It argues that (1) human rights law can serve as an authoritative resource for providing definitions to highly contested terms such as fairness or equality, (2) it can be used to address the problem of international regulatory arbitrage, and (3) it provides a framework to hold public and private actors legally accountable. At the same time, the paper considers recent critiques of human rights law and its application to AI governance, such as (1) lack of effectiveness; (2) inability to effect structural change, and finally, (3) the problem of cooptation. The article argues that while there is room for international human rights in the realm of AI governance, we should look to it with tempered expectations as to its promises and limitations. [ABSTRACT FROM AUTHOR]

(Series Information) European Papers - A Journal on Law and Integration, 2021 6(2), 1097-1116 | European Forum Insight of 29 October 2021 | (Table of Contents) I. Introduction. - II. The facts of the cases. - III. The annulment of the commission's decision in the Amazon case. - IV. The court dismisses the appeals in the Engie case: The tax rulings granted by Luxembourg to Engie breached EU Law. - V. Applying an effect-based approach to State aid control is not enough to effectively tackle harmful tax competition. - VI. Conclusions. | (Abstract) The rulings of the General Court in the cases of Amazon and Engie (respectively, joined cases T-816/17 and T-318/18 Luxembourg. v Commission ECLI:EU:T:2021:252 and joined cases T-516/18 and T-525/18 Luxembourg v Commission ECLI:EU:T:2021:25) are the last two episodes of the "tax ruling saga". This Insight seeks to examine the potential innovations that these judgements could bring in the context of the application of State aid rules to unfair tax practices. Indeed, this contribution attempts to analyse the impact of the abovementioned rulings on both the notions of "State origin" and "selectivity", as well as the new effect-based approach proposed by the Commission and endorsed by the Court. To do so, both previous relevant cases of the "saga" and the current political context are taken into consideration. The Insight concludes that an outcome-based perspective is not enough to render the "Vestager doctrine" an efficient instrument in the fight against harmful tax competition.

The European Union (EU) has impacted regulation worldwide in areas ranging from data protection to trade or antitrust. In select fields, it has defined stringent standards and has had an impact on global business because of the size of its market and the price of participating in it. The purpose of this paper is to analyze the main provisions of the EU regulation on Environmental, Social, and Governance (ESG) and determine whether and how it will have an impact on business globally, including regulations around disclosure for companies, taxonomy for the asset management sector, supply chain due diligence requirements, new mechanisms such as carbon markets, or non-tariffs restrictions on international trade. For this, our analysis includes an in-depth review of the literature on EU regulation of the past 20 years, complemented with interviews with experts in the field, in order to understand the main tools used by European policymakers in ESG regulations to understand their effect. The analysis adds to the body of research pertaining to the impact of regulation on business and the growing body of research on sustainable finance. We find that the new ESG regulation impacts countries outside of the EU, influencing regulation worldwide, and raising the question of possible regulatory arbitrage. [ABSTRACT FROM AUTHOR]

Copyright of Journal of International Business Studies is the property of Springer Nature and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This article analyses regulatory arbitrage in financial markets from a risk-based perspective. It assesses regulatory arbitrage in terms of the risk it may pose to the attainment of a regulatory objective, in this case financial stability. Its most distinct contribution to the literature is the application of the NOAEL approach—thus far mainly used in public health literature and regulatory toxicology—to the legal analysis and management of arbitrage risks. We propose several qualitative parameters relating to the likelihood of regulatory arbitrage and the negative impact if such arbitrage should occur. The article ultimately aims to help frame the ongoing debate about policy-making and the use of risk assessment methodologies to cope with regulatory arbitrage in financial markets. [ABSTRACT FROM AUTHOR]

The aim of the article is to analyze the features of regulatory arbitrage between credit and microfinance organizations in the retail lending market in Russia and to develop proposals to improve existing regulations on the activities of professional lenders. The work employed the methods of analysis, synthesis, generalization, as well as comparative legal research. The author found that regulatory arbitration might aim to get benefit from imperfect legislation. Signs of regulatory arbitration may indicate the inefficiency and redundancy of current legislation concerning the regulation of consumer lending. The author developed the following recommendations: to reduce redundant regulation regarding the limits of the full loan value for point-of-sale loans and installment loans; to switch to licensing system of financial organizations, considering the scale of their activities and the produced risks.

This paper focuses on the interplay between accounting standards and tax laws in the context of regulatory arbitrage by examining the development of synthetic leases especially in the USA. In a synthetic lease, the lease remains off balance sheet for financial reporting by the lessee, while depreciations and interest expenses can be deducted for tax purposes. Exploring the evolving structures of synthetic leases over the last 30 years, the paper demonstrates how financial engineers have been able to perpetually re-structure this sophisticated instrument to keep it off-balance sheet instrument notwithstanding regulatory changes. Specifically, it shows that the most recent revision of lease accounting standards in 2016 – that intended to mark the end of off-balance sheet leases under IFRS and US-GAAP – resulted in reviving the demand for synthetic leases as the tax benefits outweigh the structuring costs. Contributing to the debate on the shift towards international accounting convergence (including US-GAAP and IFRS), the paper argues that attempts to limit regulatory arbitrage may also consider the reciprocal linkages between accounting standards and tax laws. For instance, tax laws should be considered as a means to limit regulatory arbitrage in financial reporting. [ABSTRACT FROM AUTHOR]

Non-judicial recovery of debts is now rampant in Central and Eastern Europe (CEE). The reason is two-fold. On the one hand, the significant number of defaults in the poorer areas of Europe makes the CEE region a very attractive market for debt-collection. On the other hand, the activity is almost entirely unregulated, especially regarding abusive debt collection practices. The CEE region still lacks mature, strong, and experienced supervisory agencies that could tackle borderline activities. This enables companies involved in debt collection to comply easily with the minimal legal provisions and to circumvent the actual purpose of the law, including through tax sheltering and money laundering. The main argument developed in the paper is that the debt collection system it is designed to maximize profits, minimize tax base and, potentially, can serve as money laundering mechanism. The system functions in a triadic relationship: the debt-seller (a credit institution), the debt-buyer (usually an investment company), and the debt-administrator (a debt-collection agency, either fully owned by, or under the control of the debt-buyer), where debt portfolios are purchased at huge discounts (varying between 90 and 95% of face value). By revealing the mechanism used by debt-collectors, the paper calls for legislative intervention to seal the gap and ensure adequate taxation of debt-collection activities. The nature of regulatory arbitrage involved relates both to tax law as well as to regulatory standards, such as licensing requirements. Debt buyers benefit from the EU passport rule, make high returns on their 'investments' and optimize their taxes on profits obtained. Debt administrators perform their activity at almost no liability and no tax payable to the state. This mechanism creates favorable premises for money laundering and financing of illegal activities, as the web of offshore companies behind the debt-buyer renders the verification of the origin of their investment money extremely difficult. Using Romania as a case study, the paper addresses not only the aforementioned practices and risks, but also the potential reasons behind the state's inability either to adopt adequate legislation, or to enforce it. In doing so, the paper employs empirical evidence regarding the activity of ten Romanian debt collection agencies and relevant case law thereof. The paper concludes with the authors' proposal for a potential solution, which can be extended beyond Romania. [ABSTRACT FROM AUTHOR]

This paper contributes to the debate on the adequate regulatory treatment of non-bank financial intermediation (NBFI). It proposes an avenue for regulators to keep regulatory arbitrage under control and preserve sufficient space for efficient financial innovation at the same time. We argue for a normative approach to supervision that can overcome the proverbial race between hare and hedgehog in financial regulation and demonstrate how such an approach can be implemented in practice. We first show that regulators should primarily analyse the allocation of tail risk inherent in NBFI. Our paper proposes to apply regulatory burdens equivalent to prudential banking regulation if the respective transactional structures become only viable through indirect or direct access to (ad hoc) public backstops. Second, we use insights from the scholarship on regulatory networks as communities of interpretation to demonstrate how regulators can retrieve the information on transactional innovations and their risk-allocating characteristics that they need to make the pivotal determination. We suggest in particular how supervisors should structure their relationships with semi-public gatekeepers such as lawyers, auditors and consultants to keep abreast of the risk-allocating features of evolving transactional structures. Finally, this paper uses the example of credit funds as non-bank entities economically engaged in credit intermediation to illustrate the merits of the proposed normative framework and to highlight that multipolar regulatory dialogues are needed to shed light on the specific risk-allocating characteristics of recent contractual innovations. [ABSTRACT FROM AUTHOR]

This paper explores regulatory arbitrage from a legal point of view. I start from the assumption that legislators will sometimes wish to prevent regulatory arbitrage and examine legal tools available to this end. To back up the underlying assumption, I present two perspectives on the phenomenon of regulatory arbitrage. One perspective stresses its competitive element, the other one focuses on instances of arbitrage as unwanted avoidance of a legal regime. It is suggested that from both perspectives we will find that – at least sometimes – regulatory arbitrage is unwanted. I move on to illustrate how EU and U.S. legislators have dealt with an example of unwanted arbitrage. The main part of the paper then deals with legal tools to suppress arbitrage. The main focus is on legislative drafting techniques such as choosing a narrow wording, a broad wording, anti-evasion rules or the concept of abuse. I conclude with a glance at problems of regulatory arbitrage in a corporate setting. [ABSTRACT FROM AUTHOR]

The revision of the asset and liability definitions is at the core of the International Accounting Standards Board's (IASB) efforts to reflect more truthfully the economic substance of the underlying business transactions. In the IASB's revised Conceptual Framework (CF) from 2018, the board redefined assets and liabilities in terms of rights and obligations, thereby explicitly abstaining from a notion of indivisible balance sheet items. This alteration lays the conceptual foundation for carving out pieces of an item in accounting standards, enabling the removal of arbitrary bright line tests, and, eventually seeks to tackle regulatory arbitrage. Drawing upon 18 expert interviews as well as a document analysis, this study sheds light on the process that led to the anchoring of the rights and obligations model in the IASB's CF. Using literature on ambiguities in accounting as a theoretical frame, this study goes on to show that removing ambiguities in the asset and liability definitions creates new ambiguities and additional discretionary leeway in turn. The paper argues that the perpetual cycle of ambiguity reduction and creation in accounting (Davie, 2000) also includes ambiguity shifting between the conceptual basis of financial reporting and accounting standards. By comparing the previous International Accounting Standard (IAS) 17: Leases, which followed a physicalist, ownership-based notion of assets, with the revised International Financial Reporting Standard (IFRS) 16, the paper demonstrates that the explicit anchoring of the rights and obligations approach does not fully solve the issue of regulatory arbitrage. Instead, it shifts the playing field for structuring activities from the evasion of precise rules to the bending of interpretations. [ABSTRACT FROM AUTHOR]

Copyright of Informacion Comercial Espanola Revista de Economia is the property of S.G.E.E.I.P.C., Secretaria de Estado de Comercio, Ministerio de Industria, Comercio y Turismo and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Variable universal life insurance, a financial instrument blending in features of both a conventional insurance policy and a securities product, has a long history in sophisticated financial markets such as the United States, yet is new to China'sfinancial system. The variable insurance made in China serves different business purposes than its U.S. counterparts. Notably, it played a salient role as afinancing instrument for the hostile bidder in the landmark Baoneng/Vanke hostile takeover attempt. It results in distinctivefnancial risks emergingfrom China's regulation institution. Drawing contrast to the United States and employing theories on the economic analysis of regulation, this article examines the previous and current regulatory approaches toward the Chinese version of variable insurance and criticizes the disoriented regulation philosophy. It argues that the newly promulgated Asset Management Rules are not helpjul in recognizing the securities feature embedded in variable insurance, nor do they optimally mitigate the financial risks associated with variable insurance. The policymakers have yet to balance the freedom offinancial innovation with the regulation of the financial market. As a result, the regulators would have to sacrifice either the proper functioning of variable insurance or the stability of the financial system. [ABSTRACT FROM AUTHOR]

Regulatory arbitrage, or the ability of financial firms to circumvent or neutralize rules, is a classic problem of financial regulation. This article draws on transaction cost economics (TCE) to reformulate this old problem, thus defining regulatory arbitrage as a contracting hazard arising from interactions between the regulator and regulated firms, given bounded rationality and opportunism. Following standard TCE, the article first characterizes the implicit regulatory contract in finance, focusing in particular on the mobile and elastic nature of regulated actors and financial assets as well as the contested utility of financial innovation. It is then argued that this incomplete and hazard‐prone regulatory bargain must be matched with a governance structure that both adapts to unforeseen circumstances and avoidance strategies and copes with radical uncertainty about the welfare consequences of financial innovation. To that end, the article discusses how a governance structure here termed "relational regulation" might facilitate such ex post governance under uncertainty. [ABSTRACT FROM AUTHOR]

This article analyzes the implementation of the Basel II, II.5 and III rules in Latin American countries by means of specific banking regulations and finds that because the rules were not fully implemented, banks were then able to use some of the principles that give them room for regulatory arbitrage and facilitate illicit financial flows (IFFs). The Basel banking norms supposed that regulatory capital would be a minimum of 10.5%, but equity to asset ratios computed for big banks fell by 1.2 percentage points between 2005 and 2015 and provisions for loan losses on assets increased 0.6 percentage points in the same period. The on-demand implementation of these standards puts the region at the mercy of an underground globalization that favors IFFs. [ABSTRACT FROM AUTHOR]

Copyright of Informacion Comercial Espanola Revista de Economia is the property of S.G.E.E.I.P.C., Secretaria de Estado de Comercio, Ministerio de Industria, Comercio y Turismo and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Cross‐border regulatory arbitrage by global banks remains the main challenge to the effectiveness of macroprudential policy. This article aims to improve the understanding of the extent to which macroprudential initiatives around the world have shaped global banking, focusing on U.S. banks. An ad hoc dataset on the geographical distribution of on and off balance sheet activities of foreign branches allows the investigation of whether regulatory arbitrage has stimulated international leakages of macroprudential regulation. I first focus my attention on the lending behavior in those host countries in which foreign branches are left out of the regulatory perimeter via the institution‐targeted tools implementation. I then investigate whether macroprudential policy leakages due to regulatory arbitrage occur via off‐balance sheet activities. My findings suggest that institution‐targeted macroprudential regulation in host countries increases branches' local lending, especially when U.S. banks are also exempted from the corresponding tool at home. I further find evidence in support of the fact that stricter local macroprudential policy has increased off‐balance sheet activities of resident foreign branches, as far as interest rate swaps exposures are concerned. From a normative standpoint, my results highlight the importance of reciprocity and international cooperation among macroprudential regulators [ABSTRACT FROM AUTHOR]

Banks are regulated more than most firms, making them good subjects to study regulatory arbitrage (avoidance). Their latest arbitrage opportunity may be the new leverage rule covering the largest U.S. banks; leverage rules require equal capital against assets with unequal risks, so banks can effectively relax the leverage constraint by increasing asset risk. Consistent with that conjecture, we find that banks covered by the new rule shifted to riskier, higher yielding securities relative to control banks. The shift began almost precisely when the rule was finalized in 2014, well before it took effect in 2018. Security level analysis suggests banks actively added riskier securities, rather than merely shedding safer ones. Despite the risk shifting, overall bank risk did not increase, evidently because the banks most constrained by the new leverage rule significantly increased leverage capital ratios. [ABSTRACT FROM AUTHOR]

Over time, the Czech Republic has become a clear market leader in SE incorporations. For instance, in 2012, more than 55% of all Societas Europaeas were incorporated in the Czech Republic. In recent years, the number of SE incorporations has always been substantial in the Czech Republic, which has created an interesting puzzle for both academics and practitioners. In previous research, a three-level structure of Czech SEs was identified - (i) operating SEs, (ii) "UFO SEs" and (iii) Shelf SEs. In a follow-up study prepared by Lasak and Eidenmueller, several corporate governance elements were identified as forces driving SE incorporations in the Czech Republic. My paper analyses these driving forces in the light of the development of Czech corporate governance and evaluates how sustainable these drivers for market leadership of the Czech Republic in terms of Czech SE incorporations are in the light of the recodification of Czech private law, which came into effect on 1 January 2014 and which significantly affected the motives behind the large boom in the number of SEs in the Czech Republic between 2004 and 2011/2012. [ABSTRACT FROM AUTHOR]

Using hand‐collected data, we creatively construct an 'on‐balance‐sheet shadow banking business' (OBS‐SBB) measure to precisely quantify commercial banks' shadow banking activity concealed on their balance sheets. We show that OBS‐SBB activities could both increase individual and systemic risks. To further test the underlying mechanisms, we use China's implementation of Basel III as an exogenous shock and employ the difference‐in‐differences approach. We find that banks demand OBS‐SBB in order to bypass capital requirements, previously less‐capitalised banks significantly increase their OBS‐SBB ex‐post, and greater impact is found among small and medium‐sized banks and during loose monetary policy periods. [ABSTRACT FROM AUTHOR]

This paper discusses two pertinent policy issues dealing with the global liquidity crisis - global prudential regulation reform, and reassessment of using international reserves in the crisis. We point out the paradox of prudential regulations – while the identity of economic actors that benefited directly from crises avoidance is unknown, the cost and the cumbrance of regulations are transparent. Hence, crises that had been avoided are imperceptible and are underrepresented in the political discourse, and the demand for prudential regulations declines during prolonged good times, thereby increasing the ultimate cost of eventual crises. While the seeds of the present crisiswere mostly home grown, international flows of capital magnified its costs. Global financial integration produces the by-product of “regulatory arbitrage” – capital tends to flow to underregulated countries, frequently resulting in excessive risk taking, in anticipation of future bailout. Dealing with “regulatory arbitrage” requires coordinated prudential regulations that should apply as equally as possible to domestic and foreign players. A coordinated globalized prudential regulation, by increasing the cost of prudential deregulation, would mitigate the temptation to under-regulate during prolonged good-times, thus adding a side benefit.We also analyze the different approaches to the use of reserves during the crisis and what this means for the global financial system. The deleveraging triggered by the crisis implies thatcountries that hoarded reserves have been reaping the benefits. The crisis illustrates the importance of the self insurance provided by reserves, as well as the usefulness of policies that channel a share of the windfall gains associated with improvements in the terms-of-trade to reserves and sovereign wealth funds. The reluctance of many developing countries to draw down on their reserve holdings raises the possibility that they may now suffer less from the “fear of floating” than from a “fear of losing international reserves”, which may signal deterioration in the credit worthiness of a country. While the selective swap lines offered by the FED to several EMs help, it falls short of dealing with the fear of losing reserves. Mitigating this concern should be the prime responsibility of the international financial institutions.