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Developing economies can strengthen their financial systems by implementing the main elements of global regulatory reform. But to build an effective prudential framework, they may need to adapt international standards taking into account the sophistication and size of their financial institutions, the relevance of different financial operations in their market, the granularity of information available and the capacity of their supervisors. Under a proportionate application of the Basel standards, smaller institutions with less complex business models would be subject to a simpler regulatory framework that enhances the resilience of the financial sector without generating disproportionate compliance costs. This paper provides guidance on how non-Basel Committee member countries could incorporate banks’ capital and liquidity standards into their framework. It builds on the experience gained by the authors in the course of their work in providing technical assistance on—and assessing compliance with—international standards in banking supervision.

Banks and Banking --- Finance: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: Government Policy and Regulation --- General Financial Markets: Government Policy and Regulation --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Financial services law & regulation --- Banking --- Liquidity risk --- Liquidity requirements --- Basel III --- Basel Core Principles --- Banks and banking --- State supervision --- Financial risk management

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Financial Sector Assessment Program; Technical Note-Stress Testing the Banking Sector.

Monetary policy --- Banks and Banking --- Finance: General --- Industries: Financial Services --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Financial Institutions and Services: Government Policy and Regulation --- Banking --- Finance --- Financial services law & regulation --- Stress testing --- Credit risk --- Market risk --- Financial institutions --- Financial regulation and supervision --- Financial sector policy and analysis --- Loans --- Banks and banking --- Financial risk management --- Switzerland

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This Detailed Assessment of Observance report specifies Base Core Principles (BCP) for effective banking supervision in Australia. An assessment of the effectiveness of banking supervision requires a review of the legal framework, and a detailed examination of the policies and practices of the institution(s) responsible for banking regulation and supervision. In line with the BCP methodology, the assessment focused on banking supervision and regulation in Australia and did not cover the specificities of regulation and supervision of other financial institutions. The assessment has made use of five categories to determine compliance: compliant; largely compliant, materially noncompliant, noncompliant, and non-applicable. The report insists that Australian Prudential Regulation Authority (APRA) should put more focus on assessing the various components of firms’ Internal Capital Adequacy Assessment Process and other firm-wide stress testing practices. A periodic more comprehensive assessment of banks’ risk management and governance frameworks will further enhance APRA’s supervisory approach.

Banks and Banking --- Finance: General --- Public Finance --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Financial Institutions and Services: Government Policy and Regulation --- Public Administration --- Public Sector Accounting and Audits --- Banking --- Financial services law & regulation --- Finance --- Management accounting & bookkeeping --- Credit risk --- Operational risk --- Market risk --- Stress testing --- Financial regulation and supervision --- Liquidity risk --- Internal audit --- Public financial management (PFM) --- Banks and banking --- Financial risk management --- Auditing, Internal --- Australia

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Recent advances in digital technology and big data have allowed FinTech (financial technology) lending to emerge as a potentially promising solution to reduce the cost of credit and increase financial inclusion. However, machine learning (ML) methods that lie at the heart of FinTech credit have remained largely a black box for the nontechnical audience. This paper contributes to the literature by discussing potential strengths and weaknesses of ML-based credit assessment through (1) presenting core ideas and the most common techniques in ML for the nontechnical audience; and (2) discussing the fundamental challenges in credit risk analysis. FinTech credit has the potential to enhance financial inclusion and outperform traditional credit scoring by (1) leveraging nontraditional data sources to improve the assessment of the borrower’s track record; (2) appraising collateral value; (3) forecasting income prospects; and (4) predicting changes in general conditions. However, because of the central role of data in ML-based analysis, data relevance should be ensured, especially in situations when a deep structural change occurs, when borrowers could counterfeit certain indicators, and when agency problems arising from information asymmetry could not be resolved. To avoid digital financial exclusion and redlining, variables that trigger discrimination should not be used to assess credit rating.

Finance. --- Funding --- Funds --- Economics --- Currency question --- Banks and Banking --- Money and Monetary Policy --- Industries: Financial Services --- Intelligence (AI) & Semantics --- Model Evaluation and Selection --- Forecasting and Other Model Applications --- Large Data Sets: Modeling and Analysis --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Technological Change: Choices and Consequences --- Diffusion Processes --- Monetary economics --- Financial services law & regulation --- Finance --- Machine learning --- Credit risk --- Credit --- Credit ratings --- Loans --- Financial regulation and supervision --- Money --- Financial institutions --- Technology --- Financial risk management --- United States

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Asian countries have high demand for U.S. dollars and are sensitive to U.S. dollar funding costs. An important, but often overlooked, component of these costs is the basis spread in the cross-currency swap market that emerges when there are deviations from covered interest parity (CIP). CIP deviations mean that investors need to pay a premium to borrow U.S. dollars or other currencies on a hedged basis via cross-currency swap markets. These deviations can be explained by regulatory changes since the global financial crisis, which have limited arbitrage opportunities and country-specific factors that contribute to a mismatch in the demand and supply of U.S. dollars. We find that an increase in the basis spread tightens financial conditions in net debtor countries, while easing financial conditions in net creditor countries. The main reason is that net debtor countries are, in general, unable to substitute smoothly to other domestic funding channels. Policies that promote reliable alternative funding sources, such as long-term corporate bond market or stable long-term investors, including a “hedging counterpart of last resort,” can help stabilize financial intermediation when U.S. dollar funding markets come under stress.

Banks and Banking --- Finance: General --- Financial Risk Management --- Foreign Exchange --- Exports and Imports --- International Financial Markets --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Interest Rates: Determination, Term Structure, and Effects --- Financial Crises --- International Investment --- Long-term Capital Movements --- Finance --- Financial services law & regulation --- Economic & financial crises & disasters --- Currency --- Foreign exchange --- International economics --- Hedging --- Interest rate parity --- Financial crises --- Currency markets --- Financial regulation and supervision --- Financial services --- Financial markets --- International investment position --- External position --- Financial risk management --- Interest rates --- Foreign exchange market --- Investments, Foreign --- United States