A Feasibility Study of the Regulatory and Prudential Regulations for the Development Banks and Some Regulatory Policies for the Resistance Economy

Document Type : Research/Original/Regular Article

Authors

1 PhD student in finance, Faculty of Management and Economics, Islamic Azad University, Science and Research Unit, Tehran, Iran

2 Associate Professor, Department of Finance and Banking, Faculty of Management and Accounting, Allameh Tabatabaei University, Tehran, Iran

3 Assistant Professor, Department of Private Law, Faculty of Humanities, Azad University, Electronic Branch, Tehran, Iran

4 Assistant Professor, Department of Economics, Faculty of Management and Economics, Islamic Azad University, Science and Research Branch, Tehran, Iran

Abstract

The general policies of the resistance economy aim to support development, dynamicity, and improvement of resistance economy indexes in order to achieve the 20-year development plan. This is issued through a flexible, opportunistic, and generative approach. The instability of economy can have irreparable consequences, resulting in instable periods in the macro-economy and banking system of the country. This manifests itself through increasing inflation, high bank interest rate, increased inter-banking loan interest, among others. It is evident that the developed and developing economies consider prudential macro-policies. Financial regulations in banks could be studied at three levels: 1. Regulatory rules concerning the establishment and activities in a country, 2. Regulations enacted by the administrative cabinet, 3. Prudential level which investigates the legality of development banks. Considering the different roles, aims, and performances of the development banks from commercial ones, one can suggest that one of the main necessities of these types of banks is to analyze the regulatory rules controlling them. Therefore, this study employs a descriptive-practical method to answer the following two questions: 1. From a theoretical perspective, should development banks be controlled through prudential regulations? Does Bazel agreement provide a proper framework for the development banks? If so, what are their challenges? The findings indicated that rather than enforcing prudential regulations, the development banks need to be controlled by the supervisor of the sector in order to achieve their aims. So far as the second question is concerned, after analyzing three Bazel agreements, it was found that the second agreement was more flexible, welcomed by most of the development banks around the world. The results concerning the third Bazel agreement showed that some of the requirements are not problematic for the development banks, such as cash risk treatment; however, some others are concerning.

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References

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Quarterly Journal of The Macro and Strategic Policies
Volume 10, Issue 40 - Serial Number 4
January 2023
Pages 800-824

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