Introduction

The rationale for the book The twenty-first century witnessed major changes in the financial environment surrounding banks and bank regulators, including central banks. This book is motivated by three of these developments and challenges. The first relates to the rise in the number and sophistication of financial and economic crimes, which shaped the international regulatory architecture. New rules and regulations led to the creation of new strategies to combat these crimes, especially ones concerning the spread of more advanced money-laundering methods and techniques, terrorist financing after 9/11 and the proliferation of weapons of mass destruction experienced lately. The second development concerns the global financial crisis of 2008, which drastically affected the regulatory environment of various international and domestic financial authorities, causing both major changes in bank lending and corporate governance policies and the development of the Basel III accord on capital adequacy for bank supervision. The third development saw the creation of a major European monetary union without a fiscal union and a giant European central bank that impacts on the conduct of monetary policy. The financial crisis also caused monetary authorities to resort to unconventional monetary policies of quantitative easing rarely witnessed previously in terms of their length and operational amount in a recessionary and deflationary environment. Additionally, some central banks resorted to holding more foreign reserves to hedge against future crises.