At present, the problem of global regulation of financial and economic relations is a subject of interest of specialist in international financial and banking regulation, scientists, and financiers. Attention to these issues has increased significantly due to recent global financial crisis.
The financial crisis that has hit the United States and later other countries in 2008-2009, has shaken the stability of the entire world economic system. It reveled the vulnerability of financial systems, their exposure to risk and insecurity. The causes of the crisis have been studied and continue to be discussed by experts, financiers and economists around the world. One of the issues associated with the emergence of the crisis was the problem of risk in the banking sector, namely the problem of systemic risk and its consequences.
Although over the past two decades, banking system has changed more than in the preceding two centuries, the nature of banking is still fraught with risk. If bankruptcy of one of the banks is perceived as a sign of instability of the banking system, the population may lose confidence in banks in general. Distrust or panic among customers and investors can damage the rest of the banks and lead to their bankruptcy. Therefore, governments try to prevent bank failures and panic among the population. In order financial capital of banks become a powerful stimulus for economic growth and raise living standards, it is necessary to significantly increase their effectiveness as an investment resource. In addressing this challenge the leading role belongs to the management of risks in the banking sector.
In this paper it is necessary to consider the concept of systemic risk in the banking sector and its implications for economic systems; the importance of financial regulation of the financial system; systemically
important financial institutions (SIFI); question of functional separation of banking between retail / commercial banking business and investment banking.
THE GLOBAL FINANCIAL CRISIS
One the causes of global financial crisis 2007-2010 was called behavior of borrowers of mortgages loans, bank customers, bankers and the U.S. government. This led, first, to unpredictable growth of credit derivatives, and secondly, to the mass panic of bank customers, caused by inability of borrowers of mortgage loans to repay their debts in time, and thirdly, to the opposition of the financial authorities and owners of large banks that accelerated the development of the crisis and the resulting large-scale financial intervention of the caller of the U.S. government in the process of its leveling. (Marshal 2010)
Measures of neutralization of the crisis and its consequences have been the subject of discussions at the “anti-crisis” summit “Group of twenty” (G20). The participants agreed on the need for a centralized body of macro-prudential regulation of the global financial system. Also it was agreed that central banks had to tighten banking supervision in accordance with the recommendations of Basel I, Basel II and Basel III. (Marshal 2010) The central banks of many countries in the world, fulfilling the recommendations of the G 20, first stepped introduction of central bank control over the imbalanced liquidity. At the same, time it became apparent that the effectiveness of their activities greatly depend on how the developers of banking policies and practices adequately understand the specifics of the mechanisms of formation of the global financial crises.
One approach to explaining the global financial crisis is the following. When studying the trends in the global economy, financiers USA and UK have put forward and developed the concept of financial stability after the global financial crisis of 2007-2009 got a scientific and practical significance for the global financial science. It should be emphasized that at first it was treated solely as an objective of banking supervision, and after the financial crisis – mostly as an important objective of the global financial and economic regulation. Under the financial stability is understood as the ability of the financial system at the same time effectively perform three key functions:
1. Effectively and continuously promote the intertemporal
allocation of resources in the economy from savers to
investors and the allocation of economic resources in general.
2. Identify the financial risks and evaluate them for the future with reasonable accuracy, as well as control them.
3. Eliminate or neutralize the financial and real economic shocks or unexpected events. (Marshal 2010)
In other words, financial stability means stable functioning of financial institutions, markets, and their infrastructure (the financial system). In turn, ensuring financial stability means preventions of violations of financial crises and the efficient resolution of crises in the financial system with minimal losses for her and the economy. (Sorkin 2009)
Further consideration should be given to the concept of financial risk and methods to resolve it.