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Unit information: Bank Regulation and Governance in 2018/19

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Unit name Bank Regulation and Governance
Unit code LAWDM0142
Credit points 30
Level of study M/7
Teaching block(s) Teaching Block 4 (weeks 1-24)
Unit director Miss. Powley
Open unit status Not open
Pre-requisites

None

Co-requisites

None

School/department University of Bristol Law School
Faculty Faculty of Social Sciences and Law

Description

The financial crisis highlighted serious failings with the operation and conduct of banking regulation and supervision, both nationally and internationally. In the aftermath of the crisis, the nature of banking regulation has been at the forefront of the policy debate surrounding the question of how to monitor the activities of banking institutions. In the UK, a significant number of reforms have been introduced in an attempt to curb the excesses that are associated with the modern banking sector. Additionally, the UK has experienced a complete overhaul of the structure of the authorities tasked with regulating and supervising the banking sector. With the increased impetus on banks to ensure compliance with the plethora of initiatives designed to enhance their stability and improve standards of conduct, understanding the role and purpose of banking regulation and supervision is increasingly important.

This unit will explore the key elements of the UK’s banking regulation regime, providing students with a good level of understanding as to the requirements that banks have to meet following the enhanced regulatory regime developed after the financial crisis. Particular attention will be paid to the prudential elements of the framework, given the trajectory of reform following the crisis.

The unit will take into account international sources of UK law, such as the Basel accords, and will introduce a comparative element where relevant.

Topics covered will include:

  • The regulatory architecture and the role of the central bank (assessing the changes introduced to the structure of regulation in the aftermath of the financial crisis in the UK, the introduction of the twin peaks model of regulation, and engaging with the debate surrounding the role of the central bank in banking regulation)
  • Microprudential legal regulation (including capital and liquidity requirements, ring-fencing and structural requirements, the bank recovery and resolution regime and the work of the Prudential Regulation Authority in supervising the banking sector)
  • Macroprudential legal regulation (assessing systemic risk and the role of the Financial Policy Committee)
  • Regulatory governance (including issues covering the governance and accountability of regulatory bodies)
  • Internal bank governance (covering specific governance requirements that banking institutions must comply with, including the ‘Senior Managers Regime’, the new accountability regime for individuals working in banking institutions, and the debate surrounding ‘culture’ within banking institutions)
  • Innovation in banking regulation and technology (incorporating elements such as the developing use of Regulatory Technology (RegTech) within the banking sector; the evolution of the structure of the banking sector and the challenges recent developments pose for the traditional banking model)

Unit aims:

  • To enable students to develop an understanding of the role of legal regulation and supervision in enhancing the stability of banking institutions and improving standards of conduct.
  • To ensure students can identify the key legal regulations that banks must satisfy in order to be able to conduct banking activity (such as those relating to capital and liquidity requirements) and understand the procedure for resolution when a bank fails.
  • To enable students to demonstrate their ability to critically assess how the law relating to the regulation of banking institutions has evolved following the financial crisis.
  • To enable students to discuss and engage with key areas of debate relating to banking regulation, such as those surrounding the structure of banking regulatory authorities, appropriate prudential frameworks and how to improve the culture of banking institutions.

Intended learning outcomes

By the end of this unit students will be able to:

  • Discuss the purpose of regulation and supervision of the banking sector.
  • Describe and analyse the core prudential requirements that banks must satisfy, as well as the procedures for dealing with a failing bank.
  • Critically assess the development of the regulatory standards studied on the unit, at a national and international level.
  • Engage with contemporary debates and issues in the area of banking regulation.
  • Demonstrate an ability to conduct independent research and present a coherent, reasoned argument on a variety of topics relating to law and regulation of the banking sector.

Teaching details

This unit will be taught by way of lectures and seminars. There will be 10 x 1 hour lectures and 10 x 2 hour seminars.

The total contact hours for a student on this unit will be 30 hours.

Assessment Details

Formative assessment: students will have the opportunity to submit one formative assessment. The word count for this assessment will be 1,500 words.

Summative assessment: a 2,000 word coursework essay (33%) and a 3 hour unseen written examination (67%) in the May/June examination period.

These assessments will assess all of the Intended Learning Outcomes for this unit in the context of topics selected by the examiners. The examination will consist of essay questions only.

Reading and References

To account for the rapid pace of development in this subject, the reading list will be updated at the beginning of each academic year and will be monitored throughout the year.

While there is no single textbook that covers all of the topics taught on this unit, students will be referred to J Armour et al, Principles of Financial Regulation (OUP, 2016) for the majority of the introductory reading for each topic covered on this unit.

Other sources will include:

  • I H-Y Chiu, Regulating (From) the Inside (Hart Publishing, 2015)
  • C Goodhart and D Schoenmaker, ‘Should the Functions of Monetary Policy and Banking Supervision be Separated?’ (1995) 47(4) Oxford Economic Papers 539-560
  • Bank of England, ‘The Bank of England’s approach to stress testing the UK banking system’, October 2015
  • Bank of England, ‘The failure of HBOS: A report by the Financial Conduct Authority and the Prudential Regulation Authority’, November 2015
  • Financial Stability Board, ‘Key Attributes of Effective Resolution Regimes for Financial Institutions’, October 2014
  • HM Treasury, ‘A new approach to financial regulation: building a stronger system’, February 2011
  • Parliamentary Committee on Banking Standards, ‘Changing banking for good’, June 2013 (Volume I)
  • Prudential Regulation Authority, ‘The PRA’s Approach to Banking Supervision’ March 2016
  • Treasury Select Committee, ‘The run on the Rock’, January 2008

While not necessary in order to understand the material covered on this unit, students might wish to read one of two excellent accounts of the financial crisis for insights into the events surrounding the global financial crisis and the stability problems faced by banks, before they start this unit:

  • G Tett, ‘Fool’s Gold: How Unrestrained Greed Corrupted a Dream, Shattered Global Markets and Unleashed a Catastrophe’ (Little Brown, 2010)

OR

  • A R Sorkin, ‘Too Big to Fail: Inside the Battle to Save Wall Street’ (Viking Press, 2009)

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