Effective bank regulation: seven guiding principles

Pages:301-314
SUMMARY

Purpose This paper is a “viewpoint” article, and as such, the purpose of this paper is to present the author’s opinion and interpretation. Its primary purpose is to propose seven guiding principles for effective bank regulation so that these may be subject to academic criticism. Design/methodology/approach The principal theme of this paper has its origins in archival research into the nature of ... (see full summary)

 
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Eective bank regulation: seven
guiding principles
Linda Arch
International Capital Market Association Centre, Henley Business School,
University of Reading, Reading, UK
Abstract
Purpose This paper is a viewpointarticle, and as such, the purpose of this paper is to present the
authors opinion and interpretation.Its primary purpose is to propose seven guiding principles for effective
bank regulationso that these may be subject to academiccriticism.
Design/methodology/approach The principal themeof this paper has its origins in archival research
into the nature of bank regulationin the UK in 25 to 30 years after the Second World War. This paper draws
upon insights gained into the nature of bank regulationin the UK arising from that research. It focuses on
what aspects of bankregulation were effective in that earlier period. It then attemptsto convert those insights
into underlyingprinciples.
Findings Seven principles are proposed as the starting point for a discussion as to the principles that
should underpineffective bank regulation. The seven principles are set out in the introductionto the paper.
Originality/value The framework for the regulationof banks in the UK and in many other countries is a
complex one. The general trendin bank regulation in the UK in the past four decades has been technocratic,
characterised by a preferencefor codied rules, which are often detailed and technically complex. It has also
been characterised by the establishment, or further development, of intricate regulatory and supervisory
structures at national, international and supranational levels. Scholarly attention has understandably been
focused on those trends. Rather lessattention has been given to the broader principles that might underpin
and guide bankregulation. This paper seeks to contribute to that question.
Keywords Bank regulation, Legitimacy of the regulator, Objectives of bank regulation,
Principles of bank regulation, Trustworthiness in banking
Paper type Viewpoint
Introduction
For those interested in the development of the bankingsystem in the UK over the past four
decades, two trends are very remarkable. First, from the 1970s, the banking system has
become less stable, certainly in comparison with the 25 to 30 years after the Second World
The author would like to thank Springer Nature Switzerland AG for permission to re-use excerpts
from: Linda Arch, The Regulation of the London Clearing Banks, 1946-1971: Stability and
Compliance, 2018, Palgrave Macmillan, reproduced with permission of Springer Nature Switzerland
AG. A longer version of the argument made in the section titled Trust and trustworthinesswas
made in: Linda Arch (Spring 2019) “‘Our distrust is very expensive: How do we restore trust in
banks?IPPR Progressive Review, Vol. 25 No. 4, pp. 435-443: © 2019 The Author/s. IPPR Progressive
Review © 2019 IPPR. The author thanks Wiley for permission to draw upon the argument in that
article and to re-use excerpts from it. The general argument in this article has its origins in: Linda
Arch, Chapter Six: Bank Regulation Today,in London Clearing Banking, 1946-1979: Stability and
Compliance and Its Regulatory, Competition and Institutional Underpinnings, PhD Thesis, Henley
Business School, University of Reading, 2017.
The author is very grateful to Professor John Ashton and an anonymous reviewer for their
comments on the article.
Eective bank
regulation
301
Received18 June 2019
Revised25 October 2019
Accepted29 November 2019
Journalof Financial Regulation
andCompliance
Vol.28 No. 2, 2020
pp. 301-314
© Emerald Publishing Limited
1358-1988
DOI 10.1108/JFRC-06-2019-0075
The current issue and full text archive of this journal is available on Emerald Insight at:
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