Global Financial Development Report 2019 / 2020:
Bank Regulation and Supervision a Decade after the Global Financial Crisis

GFDR 2020 book and globe image

Overview

Over a decade has passed since the onset of the largest global economic crisis since the Great Depression. The crisis revealed major shortcomings in market discipline, regulation, and supervision. The Global Financial Development Report 2019/2020 provides new data and evidence on the regulatory remedies adopted to prevent future financial instability and sheds light on ongoing policy debates.


Main Messages

  • Developing countries have increased their minimum capital requirements to help curb risks, but greater information disclosure and supervisory capacity are needed.
  • Effective regulation and supervision need to harness the power of market discipline to curb excessive risk-taking by private parties.
  • Bank regulations need to be compatible with incentives, but designing and enforcing such regulations are complex tasks.
  • Less complex regulations may mean more effective enforcement by supervisors and better monitoring by stakeholders.
  • Globalization and technological change are important trends that make it even more challenging to provide effective oversight of banks.

Read the complete messages in the Overview

In Depth

image

Regulatory arbitrage

A majority of financial sector practitioners surveyed in a global poll believe that post-crisis financial regulation has led to an increase in regulatory arbitrage.

image

Financial safety nets are spreading worldwide

Approximately 2 in 3 low-income countries have explicit deposit insurance.

image

Regulatory capital ratios are at their highest since the GFC

Banking reforms have led to increased regulatory capital (capital to risk-weighted assets), especially in high-income countries.

image

Banks are shifting assets into lower risk-weighted categories

Banks have increased their regulatory capital ratios partly by shifting toward lower risk-weighted assets.

image

Developing countries have been selective in adopting Basel II/III provisions

Many developing countries still use the simple standardized approach to computing risk weights.

image

Systemically Important Banks are subject to new resolution rules

SIBs are required to hold more capital and bail-in debt. New rules for resolution and orderly liquidation have yet to be tested.

image

Minimum leverage ratio requirements are still not widely imposed

Few Basel III countries had implemented a leverage ratio requirement as of 2016

image

The quality of bank capital matters

High-quality capital can help cushion banks during times of crisis