The Stewardship Reform In Banking Business

As of December 2011, the Stewardship Code has attracted 234 contracting parties, including 175 asset managers, 48 asset owners and 11 service providers. This is a good beginning and a clear indication that the market is willing to take the concept of stewardship seriously. But some banking crisis changes are not effectiveness. For example, the ‘ring-fence’ policy in Vickers Report. Due to the isolation of the retail banking business, investment banking and wholesale banking services have lost relatively cheap funding sources. It will reduce the profitability of commercial banks as a whole. The recommendations of the independent commission on banking reform not only impose higher requirements financial regulation but also have some negative …show more content…
There will be two different situations. There are differences in the regulatory requirements for systemic important banks, such as differences in minimum capital requirements, differences in control measures that commercial banks participate in investment banking operations, and so on. These differences will lead to regulatory arbitrage behaviour of commercial banks. Commercial banks may change the registration, establish different business segments of the subsidiary in different countries or regions and other forms in order to avoid its negative regulation. Or, according to Barnabas, Shearman & Sterling (2012) notes, ‘Foreign banks with small retail banking operations but a larger wholesale and investment operations will be adversely affected by restructuring costs. These banks may not be able to economically viable division of their business, leading to exit the UK market’. In addition, when financial institutions engage in retail banking, corporate banking and investment banking, structural separation of the ring-fencing alone can not prevent the risk of mutual transmission. Moreover, Stewardship Code is not a binding …show more content…
Many businesses and consumers had lost confidence in banks. After the banking crisis, many companies significantly reduced the investment and led to long-term economic negative growth and rising unemployment. More seriously, the banking crisis caused a global economic recession. In order to address the negative impact of the banking crisis, the Financial Reporting Council released the Stewardship Code. And Independent Commission on Banking Reform published a Vickers Report. The UK regulatory authorities have also improved a number of measures to protect the rights of banks and consumers and to prevent banking crises. These measures reduced bank risk and helped the economy to develop stable. But there are several measures not very effective, for example, the ‘ring-fence’ policy. It will increase regulatory difficulties and regulatory costs. And the implementation of ‘ring-fence’ policy is difficult to achieve. There are no perfect changes for bank failures, the UK regulatory should continue to improve the policy based on the actual