A Universal Law–Driven Banking System: A Cybernetic Framework for Financial Integrity, Balance, and Societal Stability

Abstract Modern financial systems exhibit persistent structural pathologies: corruption, regulatory lag, opacity asymmetries, and systemic contagion. This paper proposes the Universal Balance–Feedback Financial Framework (UBFF), a formal cybernetic architecture grounded in four universal laws—system integrity, balance in nature, feedback loop mechanism, and interconnected nodes. We derive a state-space formulation of the financial system, specify an explicit feedback control law, and prove asymptotic stability via a Lyapunov function. The UBFF is formalized as a directed weighted graph of financial nodes (banks, regulators, households, firms) governed by coupled differential equations. We demonstrate that under the proposed feedback law, imbalance indicators converge to equilibrium at a rate governed by the control gain parameter κ. Simulation results using a four-node model calibrated to stylized Philippine banking data illustrate convergence under synthetic stress scenarios. The framework provides a unifying language for financial governance reform compatible with existing regulatory infrastructures.