Safe Bank

The paper is devoted to securitization and securitization funds operating on the Polish market. At the beginning the securitization process is characterized from the banks perspective. Afterwards the author undertakes an analysis of the securitization funds operating on the Polish market in 2005–2009. Then, the author present, the data showing the rise in banks interest in resale of their claims to securitization funds. An analysis of the investment policies declared by the securitization funds showed that these funds are also interested in taking over debts from banks

The definition of a deposit under Directive 94/19/EC has been perceived as a non-controversial issue. Also during the ongoing work on the revision of the aforementioned directive much more focus has been put on issues concerning the target level of the DGS fund or the reimbursement period. However, under the stressed conditions of the Icelandic crisis, this matter sparked a dispute of significant economic importance. Court proceedings in the case Aresbank S.A. vs. NBI hf., Fjármálaeftirlitid and Iceland have become a major test for both the Icelandic judiciary and the legal system of the European Economic Area. It is also one of the few cases of judicial review of provisions of Directive 94/19/EC. The case of Iceland indicates that bank restructuring is inevitably related to substantial legal uncertainty arising from the discretion of the national authorities, which are susceptible to political and social influence.

The last decade was presented with a new configuration of players in the financial system, to which hedge funds have contributed profoundly. Structural changes occurring in the financial system during that period had an impact on the dynamics of financial difficulties. People historically involved in introducing regulationsand economists paid attention to banks as potential channels giving rise to systemic risk. The characteristics of banks was the main reason behind formulating policy to regulate their functioning.

The article analyzes the relationship and consequences following from the effect of hedge funds on the financial system and the real economy. The first part of the paper refers to legal regulations regarding hedge funds. The next section introduces and discusses the notion of systemic risk. The subsequent two parts, and at the same time the body of the article, are dedicated to the analysis of the potential impact that hedge funds may have on creating systemic risk. Furthermore, the author discusses methods for reducing exposure to risk and cushioning shocks on the market under consideration. The analysis enables to draw a conclusion about the rules and their consistent observation as part of counterparty credit risk management (CCRM). At the highest level of institutions subject to regulation, i.e. banks, these rules are effective tools for reducing the effect of hedge funds on systemic risk and thereby the real economy. The conclusion emphasizes that hedge funds, whose characteristics differ from the remaining market players, may hinder adopting CCRM. Such a state of affairs stems from the fact that these funds can generate certain market problems and other challenges.

The cyclical nature of economic development, and in particular periods of crisis, alter the conditions under which risk is managed. The changes that have ensued in recent decades have given rise to the emergence of a new environment for banking sector entities. Banks, whose activity is mainly predicated upon the management of risk, must identify changes in their operating environment on an ongoing basis and adapt their management systems (including risk management) to new challenges. The dynamics and scale of change in the banking environment has in recent years been of such significant extent that merely monitoring said change is a highly inadequate response if meeting the requirements of conducting banking operations safely is the goal. Bank management must analyze how various scenarios, even those highly unlikely but nevertheless possible ones, could impact a given bank, and undertake adaptive measures.The most important changes in banking are interconnected phenomena: globalization, and the development of technology and communications.

The most destructive impact on the stability of financial markets comes from the rising level of moral hazard, which on the one hand is related to financial sector deregulation, leading to the emergence of entities that are “too big to fail” and to an unprecedented expansion of finance, and on the other, to a series of regulatory decisions taken in response to the global financial crisis. Growing capital mobility and rising competitive pressures are further conducive to moral hazard. As a consequence, the business cycle structure has undergone a fundamental change, in particular with respect to the source and nature of crisis-related disturbances. A deterioration has also taken place with respect to the perception of the role of safety measures in place to counteract the consequences of risk. An analysis of a bank’s fragility to the incidence of change in its operating environment constitutes the basis for shaping its risk management strategy and for creating the necessary safety buffers that will enable the bank to withstand adverse circumstances.

Banks should have action plans in place with respect to foreseeable negative or crisis scenarios in order to, in practice, ensure sufficient time to deal with unforeseeable problems.

Financial system regulations must be changed in such a way as to effectively limit moral hazard and eliminate conditions that contribute to its emergence. Problems associated with the further development of finance in a direction that is disconnected from the needs of the real economy, as well as market consolidation that is reflected in the growth of entities that are “too big to fail”, and even “too big to be effectively rescued”, should be a priority for regulators and policymakers. Sanctions in the form of elimination from the market of entities that take on excessive risk can limit moral hazard and enhance market discipline. In a European context, an urgent challenge is to develop methods and procedures for the orderly liquidation of banks (resolution). In terms of introducing corrections to the financial system infrastructure, it is necessary to separate discrete types of activity (particularly intermediation vs. investment and trading operations) in order to limit the exposure of consumer bank deposits to investment or trading risk. It is also desirable, even necessary, to simplify the structure of very large banking groups.

The publication presents regulations in Slovakian law which aim to counteract the crime of money laundering. The applicable legislation came about as a result of the implementation of international acts of law which oblige signatories to ensure effective legal solutions in this regard in domestic law. The regulations of the Slovakian Act on Prevention of Legalization of Proceeds of Criminal Activity and Terrorist Financing as well as the criminal code are discussed. Basic terminology used in the act is presented, as are the organization and competencies of agencies responsible for counteracting such occurrences. Since such crimes are often carried out with the intermediation of the banking system, key issues in this respect have also been touched upon. The subject of additional chapters are criminal and administrative consequences in the event of failure to observe the relevant requirements. A comparative analysis has also been carried out in the area of Polish and Slovakian regulations in order to demonstrate similarities and differences pertaining to particular issues. It is emphasized that money laundering is of international scope and in order to cooperate effectively, a knowledge of its fundamental issues in two neighboring countries is desirable.

This paper is dedicated to the topic of operational risk management linked to holistic approach in overall risk management within banking organization. A risk driven banking culture faces many challenges and obstacles. Banks are charged with many regulatory requirements, which on the one hand raise operational costs, and on the other reduce the potential for creative and innovative development of risk management systems. The Enterprise Risk Management (ERM) concept creates a good base for a holistic approach to risk treatment and can be assumed to be a great tool in solving many issues related to the inefficiency of the current risk management models in banks. Operational risk management viewed from a silo perspective can’t be successful when facing financial distress or financial crisis on the market. Shifting operational risk management into a wider and holistic perspective seems to be a critical issue in accomplishing of the bank’s goals by appropriate execution of strategy. A holistic approach to operational risk management helps to recognize its key role for business success. From that perspective operational risk management is a main driver of strategic risk and business risk as a whole. Operational risk management can be perceived as the main engine to a bank’s ship, which it fails, might not be able to bring the organization to its intended goals.