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How standardising regulations are affecting countries and banks alike

12 / 03 / 2013
Banking practices have been a hot topic, not only in the UK but across the European Union (EU) and the world.

Regulators worldwide have been looking at ways to curb future scandals and financial crises from happening.

Preparations for new regulations have seen banks making substantial changes and Parliaments arguing for and against potential changes to banking governance.

One of the biggest banking scandals to rock the financial world in recent times is the Libor fixing scandal, where it was found that banks had been rigging the Libor rate which is used to set financial transactions worldwide in order to gain profits.

So far, UBS, Barclays and Royal Bank of Scotland have been fined by regulators for their involvement in the Libor scandal.

Regulators criticised at least one of these banks for not having adequate internal risk models in place to stop a scandal like Libor fixing from happening.

The Basel committee, which consists of financial experts from the world’s biggest economies, has been working to produce banking regulations to encourage better practices, reduce banking risks and to prevent any future scandals.

In the EU, recommendations from Basel III have been making waves as member states have been arguing about whether or not bankers’ bonuses should have a cap imposed on them.

Basel III was drawn up to recommend practices to stop a future financial crisis from happening.
Many member states in the EU felt that bankers’ bonuses should not top the amount of pay that they receive in order to discourage risky investments. This was legislated in Brussels at the end of February.

The UK tried to stop a cap from being placed on bonuses as it was concerned that this would affect the wages of banking staff and compromise work forces. With London being a global financial hub, compromising the banking industry could place the UK in a vulnerable position.
Among the other suggestions within Basel III is that banks should have more capital behind them so that they are prepared in case investments fall through.

To ready themselves for higher requirements of capital, banks have been considering ways to increase the amount of money that they have behind them.

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