The Banking Executive Magazine - August 2021

ISSUE 152 AUGUST 2021 the BANKING EXECUTIVE 1 Editorial FINANCIAL REGULATIONS IN A POST COVID-19 ERA 13 years have passed since the Global Financial Crisis in 2018, rebuilding trust was a long and complex process. Unexpectedly, another crisis caused by Coronavirus occurred. Expectantly, the straight effects of Covid-19 will end soon but the consequences will last. Financial innovation has with no doubt caused dramatic changes to the banking environment. Over time, the core role of banks which was to take deposits from individuals who have a surplus of resources and to allocate those resources to productive activities, has evolved and became much more complex… and vulnerable to higher risks. Thus banks perform three main functions: Provide cash to households, entrepreneurs, companies and other financial institutions, enable savers to reap the benefits of long-term investments, while still being able to access liquidity when needed, in addition to assessing and monitoring the creditworthiness of borrowers more efficiently than an individual investor could. Then the crisis happened due to several factors and reasons. Trust was lost and confidence hit its lowest marks. Today and in the aftermath of the crisis, significant changes should be made in the regulatory and supervisory framework. Reforms of capital and liquidity regulation, risk management, governance and resolution regimes have been introduced. Moreover, consumer protection has been enhanced. The regulatory framework now has a better and broader base, and is less vulnerable to arbitrage. Moreover, supervisors today themselves have also changed since the crisis; they are now stricter and more pro-active. While the global financial system has become more integrated and sophisticated, global financial governance is highlighted more than ever. A greater sense of need for global collaboration and cooperation rose to ensure that weak links in the financial system do not cause very high cost on the other links. The global financial system is as strong as the weakest link. We have reached good levels of sound global financial governance, the persisting implications of the recent crisis is a stark reminder that weak financial governance of financial institutions can result in catastrophic implication on the economies, societies and individual lives. Dr. Joseph Torbey, Chairman - World Union of Arab Bankers