Bank Regulation and FSA
What are the main types of bank regulation and what are their limitations? And What are the objectives and main responsibilities of the FSA?
So firstly, what are the main types of bank regulations and what are their limitations? There are four main types of bank regulation that I am going to talk about; Systemic Regulation, Prudential Regulation and Conduct of Business Regulation. Systematic regulation or sometimes known as structural regulation, is the regulation that is mainly concerned with not only the safety of the financial system but the soundness of the financial system and can be explained through the government safety net, Lender of Last Resort and Deposit Insurance. Lender of Last Resort is where the central banks and other institutions such as the Federal Reserve provide liquidity to the banking sector at times of crisis. They preserve the stability of the banking and financial system by protecting individuals’ deposited funds and preventing panic-ridden with withdrawing from banks with temporary limited liquidity. Deposit Insurance is a guarantee that all or part of the amount that is deposited will be paid if a banks fails. It offers protection to consumers. So what is Prudential Regulation? This is the regulation that is mainly concerned with the protection of the consumer and involves monitoring and supervising the financial institutions and capital adequacy. The Conduct of Business Regulation focuses on how banks and other financial institutions conduct their business. It focuses on establishing rules in order to minimize the risk of consumers receiving bad advice and of fraud and misrepresentations. This relates of information disclosure, fair business practices and competence. I am now going to talk about the limitations of the banking regulations or in other words the arguments against regulations. As you can probably guess there are many limitations to the banking regulations. The issue with the...
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