An analysis of the financial regulatory systems followed around the world
By: Sudharsan S Sandeep Kumar Natharali Razvi Vijay PJ Natarajan P Neeraj Kannoth (118) (110) (32) (59) (31) (106)
Financial systems and financial regulators are entities setup by the government of a country to ensure the availability and flow of financial resources in a fair and lawful manner without exploitation or monopolization of the resource by individuals or organizations. The task of ensuring the availability of finance and its transference is taken up by the financial systems of a country while the task of monitoring and regulating is taken up by the financial regulator.
A set of complex and closely connected instructions/institutions, agents, practices, markets, transactions, claims and liabilities relating to financial aspects of an economy may be referred to as a financial system. A well-developed financial system enables transfer of resources from depositors/savers to borrowers/investors/entrepreneurs and plays a crucial role in the functioning of the economy. An efficient financial system will result in an easy access to financial resources; provide financial support to socially and economically productive goals, resulting in rapid economic development.
An ideal financial system can be considered to have the following entities:
Financial Institutions: are the intermediary who facilitates smooth functioning of the financial system by making investors and borrowers meet. They mobilize savings of the surplus units and allocate them in productive activities promising a better rate of return. Were these financial institutions may be of Banking or Non-Banking institutions. Financial Markets: The main functions of financial markets are to facilitate creation and allocation of credit and liquidity; and to serve as intermediaries for mobilization of savings; and to assist process of balanced economic growth; and finally to provide financial convenience. Financial Instruments: represent a claim against the future income and wealth of others. It will be a claim against a person or an institution, for the payment of some amount of money at a specified future date.
Financial Services: The term financial services can be defined as "activities, benefits and satisfaction connected with sale of money that offers to users and customers, financial related value". Efficiency of emerging financial system largely depends upon the quality and variety of financial services provided by financial intermediaries.
Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system. These rules are generally promulgated by government regulators or international groups to protect investors, maintain orderly markets and promote financial stability. The range of regulatory activities can include setting minimum standards for capital and conduct, making regular inspections, and investigating and prosecuting misconduct. The main objectives of financial regulation are:
Market confidence - to maintain confidence in the financial system Financial stability - contributing to the protection and enhancement of stability of the financial system Consumer protection - securing the appropriate degree of protection for consumers. Reduction of financial crime - reducing the extent to which it is possible for a regulated business to be used for a purpose connected with financial crime.
Financial regulators are usually set up by the governments of the respective countries or union of countries in order to monitor and regulate the financial system of the nation or group. In the ideal condition an efficient financial regulatory framework ensures both autonomy and accountability of the regulator....