Balancing Stability and Profitability: The Evolution of Regulatory Frameworks and Central Bank Policies Post-2008 Financial Crisis

Runping Du; Qingxiao Du

doi:10.62051/ijsspa.v6n3.15

Authors

Runping Du
Qingxiao Du

DOI:

https://doi.org/10.62051/ijsspa.v6n3.15

Keywords:

Financial Regulation, Basel III, Central Banks, Liquidity Risk, Monetary Policy

Abstract

This paper explores the evolving role of regulatory frameworks and central banks in safeguarding financial institutions and overall economic stability, particularly in the aftermath of the 2008 subprime loan crisis. It examines how regulatory measures such as Basel III have reshaped financial institutions' approaches to capital adequacy, liquidity management, and risk sensitivity. Additionally, it delves into the conflicts between regulatory bodies and shareholders, highlighting the challenges of balancing stability with profitability. Through a detailed analysis of the impacts of interest rate adjustments on financial institutions, the paper further assesses the effectiveness of central banks' monetary policies in promoting economic growth while preventing systemic risks. Finally, the paper offers insights into managing liquidity risks and the implications of the "Too Big to Fail" doctrine on financial stability.

Downloads

Download data is not yet available.

References

[1] REID C K, BOCIAN D, LI W, et al. Revisiting the subprime crisis: The dual mortgage market and mortgage defaults by race and ethnicity [J]. Journal of Urban Affairs, 2017, 39(4): 469-87.

[2] JAYADEV M. Basel III implementation: Issues and challenges for Indian banks [J]. IIMB Management Review, 2013, 25(2): 115-30.

[3] STERN G H, FELDMAN R J. Too big to fail: The hazards of bank bailouts [M]. Rowman & Littlefield, 2004.

[4] HELLWIG M F. Systemic risk in the financial sector: An analysis of the subprime-mortgage financial crisis [J]. De economist, 2009, 157: 129-207.

[5] KING P, TARBERT H. Basel III: an overview [J]. Banking & financial services policy report, 2011, 30(5): 1-18.

[6] ALAM T, HUSSAIN I, SAQIB A. Net Stable Funding and Liquidity Coverage Influence on Islamic Bank Financial Stability: Evidence from Malaysian Islamic Banking [J]. International Journal of Economics, Management and Accounting, 2023: 153-76.

[7] BEER C, GNAN E. Implications of ultra-low interest rates for financial institutions’ asset liability management–a policy-oriented overview [J]. Monetary Policy and the Economy Q, 2015, 2: 52-77.

[8] MOHAN R. Global financial crisis: Causes, impact, policy responses and lessons [J]. Reserve Bank of India Bulletin, 2009: 879-904.

[9] LUND D S. Nonvoting shares and efficient corporate governance [J]. Stan L Rev, 2019, 71: 687.

[10] JORION P. Risk management lessons from long‐term capital management [J]. European financial management, 2000, 6(3): 277-300.

[11] MISHKIN F S. Understanding financial crises: a developing country perspective [Z]. National Bureau of Economic Research Cambridge, Mass., USA. 1996

[12] NASSR I K, WEHINGER G, YOKOI-ARAI M. Financial risks in the low-growth, low-interest rate environment [J]. OECD Journal: Financial Market Trends, 2015, 2: 63-90.

[13] CROCKETT A. The theory and practice of financial stability [J]. De Economist, 1996, 144(4): 531-68.

[14] WINTER R A. The liability crisis and the dynamics of competitive insurance markets [J]. Yale J on Reg, 1988, 5: 455.

[15] ANTOLIN P, SCHICH S, YERMO J. The economic impact of protracted low interest rates on pension funds and insurance companies [J]. OECD Journal: Financial Market Trends, 2011, 2011(1): 237-56.

[16] YATES T. Monetary policy and the zero bound to interest rates: A review1 [J]. Journal of Economic Surveys, 2004, 18(3): 427-81.

[17] NG'ENDO K. The relationship between non interest income and financial performance of commercial banks in Kenya [D], 2012.

[18] FABOZZI F J, KOTHARI V. Securitization: the tool of financial transformation [J]. 2007.

[19] FLANNERY M J. Debt maturity and the deadweight cost of leverage: Optimally financing banking firms [J]. The American economic review, 1994, 84(1): 320-31.