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UNIT 4 REGULATORY FRAMEWORK
Warming up
Respond to the ideas given below using the conversational formulae box.
“The policy of being too cautious is the greatest risk of all” (J.Nehru, India’s first Prime Minister)
“Crisis” in Chinese is comprised of two characters – one stands for danger, the other represents opportunity.
…….
Conversational formulae box
| It is common knowledge that … It is taken for granted that … It goes without saying … Wisdom says that … There is no doubt… |
Topical vocabulary
1. Sort out the adjectives given below which are applicable to regulation into two groups opposite in meaning:
Tough, lax, soft-touch, heavy-handed, slack, stringent, strict, loose, lenient, intrusive, close
2. What do the terms prudential and macro-prudentialregulation imply? What is the aim of preemptive regulation?
3. Fill in the gaps with the derivatives of regulate or synonymic expressions:
FINANCIAL --------------in America has two problems: there is both too much of it and too little. Multiple federal agencies the financial system: five for banks alone, and one each for securities, derivatives and the government-sponsored mortgage agencies. They share these duties with at least 50 state banking and other state and federal consumer-protection agencies. Yet all these ------------failed to anticipate and prevent the worst financial crisis since the Depression, because risk-taking flourished in the cracks between them. Toxic subprime mortgages were peddled by lenders with little federal and shoved into off-balance-sheet vehicles. The greatest leverage accumulated in firms that avoided the capital requirements of banks.
On June 17th Barack Obama took aim at these weaknesses. His financial white paper gets much right. It recognises that many remedies do not require new regulators, but simply better regulations, such as beefed-up capital and liquidity buffers for banks and shifting much of the “over the counter” trade in derivatives to regulated exchanges and clearing houses.
To be sure, competition is not all bad. Nor is a unified ----------------a cure-all: Britain’s --------------------------failed to do anything about British banks’ excessive dependence on short-term, wholesale funding. But most of America’s overlap is a useless holdover from the days when commercial and investment banks, thrifts, government-sponsored enterprises and commodity dealers did different things. This overlap encourages dodgy firms to shop around for the friendliest regulator, which is how the Office of Thrift (OTS) ended up so many big, failed companies. It slows down implementation of new rules, breeds turf wars, corrodes accountability and increases costs.
But under the new proposals only one------------, the OTS, will disappear. A new agency to protect consumers will take this area over from the bank regulators. But it will not assume similar duties now held by ------------------------or Commodity Futures Trading Commission, and have little enforcement authority over thousands of state------------ finance companies and loan brokers—a glaring shortcoming given that such firms were responsible for originating a large share of toxic mortgages and abusive loans.
6. Study the words and phrases below. Underline the odd one out in each group.
1 a) risky transaction b) precarious transaction
c) dodgy transaction d) postponed transaction
2 a) to run a risk b) to take a risk
c) to avoid a risk d) to encounter a risk
3 a) to spread the risk b) to mitigate the risk
c) to eliminate the risk d) to reduce the risk
4 a) cushion b) reserve
c) subsidy d) provision
5 a) bank bailout b) bank regulation
c) bank supervision d) bank oversight
6 a) capital requirements b) capital assets
c) capital spending d) capital gains
7 a) risk-sensitive b) risk-weighted
c) risk- based d) risk-averse
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