Legal regulations for the banking sector

Abstract

Since the Great Depression of 1929-1932, banks have been subject to specific legal regulations. The origin of these regulations is, first and foremost, pragmatic and inherently a-theoretical. In the last decades of the XX century and in the first years of the XXI century, two trends in the development of bank regulations were observable. The first one was marked by intensifying deregulation and liberalization. The second was pursuing harmonization of regulations on an international scale. However, the first trend has reversed dramatically after the outbreak of the contemporary global financial crisis in 2007. The second trend, on the other hand, has been a consequence of progressive economic globalization. The emergence of a larger and lager number of banks operating on a global scale by means of a network of foreign branches and subsidiaries has created serious problems regarding bank regulations. Harmonization of bank regulations on an international scale is managed by the Basel Committee on Banking Supervision. New Capital Accords (commonly known as Basel I, Basel II, and Basel III) have been drawn up as the result of its operation; these accords define the standards of capital adequacy (and in the case of the last one also liquidity) for banks. Nevertheless, deficiencies and loopholes in the Basel regulations have impelled the most developed countries (in particular, the United States, the Great Britain, Switzerland, and the European Union) to undertake additional regulatory initiatives. They are mainly concerned with restructuring of the banking sector as well as regulation of remunerations. The plan to establish a banking union in the EU has been granted an exceptional rank among these new regulations. The nature of the banking sector in Poland causes some of the new banking regulations, those being prepared and those already in effect, to be recognised as inappropriate and unnecessary from the perspective of the stability and security of this sector in Poland.(original abstract)