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Theoretical Discussion on Banking Business Model and Banking Regulations

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Abstract

In the introductory chapter, we have initiated the discussion on the banking industry’s systemic risk and the objective of the Basel framework. As the Basel Accords are considered as a prudential banking regulation by the central banks globally, we need to understand three issues, namely: (i) the theoretical foundation of banking business and the limitations of banking business model, (ii) what are the economic rationale to regulate the financial institutions and (iii) contemporary debate on Basel framework. In this chapter, we briefly discuss those three issues. The structure of the chapter is as follows. Section 3.2 discusses the economic theories on banking and the limits of banking business model. Section 3.3 offers a comprehensive discussion on theories on banking regulation and detailed discussion on capital regulation. Section 3.4 presents the existing academic debate on CRAs’ roles in the financial industry and the position of this study. Section 3.5 presents the existing academic debate on sub-debt's role in the Basel Accord and the position of the study as well. Section 3.6 contains concluding remarks.

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Notes

  1. 1.

    In Bangladesh, the maximum insured deposit is BDT 200,000 (equivalent to USD 2,300) in the case of bankruptcies, under Deposit Insurance System & proposed Deposit Protection Act 2020 (Amanat Surokka Aain 2020) of Ministry of Finance.

  2. 2.

    It is noted that as on March 27, 2020, the implementation date of the Basel III standards that finalized in December 2017 has been deferred by one year to January 1, 2023, and transitional arrangements for output floor has also been deferred by one year to January 1, 2028, by BCBS to respond to COVID-19 global pandemic. See details at https://www.bis.org/press/p200327.htm.

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Hasan, A.K.M.K., Suzuki, Y. (2021). Theoretical Discussion on Banking Business Model and Banking Regulations. In: Implementation of Basel Accords in Bangladesh. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-16-3472-7_3

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  • Publisher Name: Palgrave Macmillan, Singapore

  • Print ISBN: 978-981-16-3471-0

  • Online ISBN: 978-981-16-3472-7

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)