Small Banks in Post-crisis Regulatory Architecture: The Case of Cooperative Banks in Poland

Before the 2008 crisis, financial deregulation and market efficiency were considered to be the regulatory pillars, particularly within the Basel II framework. The 2008 crisis resulted in the adoption of a new regulatory philosophy: that of strengthening and tightening regulatory supervision (Beck, 2010). Basel III focused on strengthening prudential regulations, mostly by requiring more, and better, capital and better loss-absorption capacities by large banks (BIS, 2010). EU and US authorities have supplemented Basel III by instituting complex supervisory infrastructures, based on a number of newly created institutions together with a redefinition of the objectives and prerogatives of those already in existence. In many cases, these new regulatory structures are diamond-shaped, rather than ladder-shaped (Masciandaro, Nieto and Quintyn, 2011). The complexity of banking regulations, plus overlapping prerogatives on newly created institutions, have considerably increased regulatory costs and are thus a burden on banks (KPMG, 2013). Moreover, in the EU, the new institutional safety net has not been implemented consistently and has been more of a case of constant rearrangement according to changes in macroeconomic priorities: from financial stability (European Banking Authority-based framework) to financial growth (European Central Bank-based framework), which has led to increased organizational uncertainty and chaos. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.