Current trends in international banking regulation vs supervision

This brief report provides an overview of recent changes and current debates in the global financial arena, since South Africa is returning to participation in the global economy and events point to growing linkage between South African and global financial communities. Recent shocks to the financial community will have far-reaching ramifications for the international economy. Regulatory authorities at the national and international level are faced with an ailing and sometimes corrupt industry. Banks are changing their business practices due to increased competition from non-bank financial actors. The drive for profitability has brought mergers and shrinkage in the number of banks, and changes the way banks run their everyday business. An array of new financial instruments has emerged. The consequences of mergers and the use of new instruments has been conglomeration. With these changes in banking practice comes a need for regulators at both national and international level. However, bankers fear that this will stifle their ability to become profitable institutions and would prefer a form of supervision, although the difference between the two is a grey area. Future accords will hopefully tend towards supervision rather than regulation and restriction of activities. The implications for South African banking are that the financial industry must decide if it will follow the world’s lead, banks must be prepared to adopt new financial instruments, and the regulatory authorities in South Africa have to choose between restrictive regulation or supervision.