The Regulatory Cycle in Banking: What Lessons from the U.S. Experience? (From the Dodd-Frank Act to Covid-19)

Abstract

This paper analyses the interactions between financial regulation and crises with reference to the experience of the United States in the period after the global financial crisis up to the Covid-19 emergency. In the last few years, a new regulatory system for large banks has arisen in the U.S., reversing some elements of the Dodd-Frank Act and introducing deviations from the international rules. This approach is also confirmed by some of the measures adopted in response to Covid-19. If this trend were to spread to other jurisdictions, the globally harmonized approach to regulation could break down. In the current exceptional circumstances as well, the international standards must not be breached, as they provide the resilience needed to sustain lending to the economy, and to keep banks safe. With the memory of the global financial crisis fading and the long post-crisis economic expansion coming to an end, the pressures to dilute the G-20 rules could grow stronger. The importance of maintaining a consistent approach to banking regulation needs to be emphasized.

The Economics of Non-bank Financial Intermediation: Why Do We Need to Fill the Regulation Gap?

“…See Hoening and Morris (2013). For an overview of the rules affecting these large banking organizations, which have undergone significant changes through the years after the finalization of the Dodd-Frank Act in 2010 see Trapanese (2020). 68 Different credit risk repositories correspond to specific stages of the NBFI intermediation process.…”

“…Indeed, in the perspective of banks calculating capital requirements for their exposures to securitizations, a specific hierarchy of approaches applies based on which formulae-based methods have to be used before the approach based on external ratings.184 SeeAdrian et al (2014b); Claessens et al (2012).185 Concerns have been raised by the approach of the Trump Administration, which has softened many of the Dodd-Frank Act requirements affecting the largest banks. For more details,Gelzinis (2019a and 2019b), and Trapanese (2020.…”