Evolution of Regulation and Supervision
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Central Banking (Elective) — CAIIB.
One-liners from this chapter
Free sample — 8 of 101 rapid-fire Q&A cards.
Why do banks require special supervision compared to other industries?
Fiduciary nature: banks accept others' money and must honour demand withdrawals; failures cause contagion and payment system disruption.
Name three layers of damage caused by bank insolvency.
Direct depositor loss, loss of confidence causing contagion runs, disruption of payment system affecting real economy.
What event triggered formation of Basel Committee on Banking Supervision in 1974?
Herstatt Bank collapse exposed settlement risk across time zones, necessitating international supervisory coordination.
When was CAMEL extended to CAMELS and what was added?
1996; added 'S' for Sensitivity-to-Market-Risk element to original five-pillar framework.
How does RBI adapt CAMELS framework for Indian banks?
Uses CAMELSC with additional 'C' for Compliance/Systems & Controls in some adaptations.
Distinguish auditor's role from supervisor's role in banking.
Auditor certifies financial statement truth/fairness; supervisor uses off-site surveillance, inspections, audit reports for oversight.
What was the UK's supervisory framework before Banking Act 1979?
No formal system; arrangements operated via unwritten conventions and moral suasion from Bank of England.
Which 1973-75 crisis triggered UK Banking Act 1979?
Secondary banking crisis prompted statutory framework for formal banking regulation.
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