Essence of Financial Regulation
Financial regulations are regulations that are meant to ensure financial institutions meet specific requirements and restrictions. The main aim of the financial regulations is to ensure that the financial systems are stable. The the regulation also ensure there is market confidence, customers are protected, and there is no financial crime that is committed. For many years, there has been financial regulation; however many states are trying to make them more strong to ensure that its goals are achieved very quickly.
Every state has devised and implemented measures that guarantee that the financial system is regulated. The government has established agencies which act the regulators of the financial system. In a place like the US, an agency like the Federal Reserve Board, has been established to monitor the banking companies. Also, the Security And Exchange Commission is meant to enforce the rules on the security market. In other places like Britain, there are regulators like the Financial Conduct Authority which is intended to control the final firms.
The state must monitor the financial institutions to ensure that they have abided with the regulation rules. The regulator will examine every aspect of the financial institution to make sure that they are operating in the right manner. Sometimes the regular can meet with the key decision-makers of the institution and investigate the company. The higher the risk of potential harm, the closer the firm is monitored.
Every company is supposed to follow the regulations. In case the company does not comply; there are multiple consequences that the company will face. In some severe cases, the institution can face enforcement proceedings. One of the best way that the government can ensure that the firms are complying is by giving threat of enforcement. The government can sometimes wind down or restructure a firm with the aim of minimizing its harm to the economy.
Financial regulating are install as it ensures that the customers are protected from financial fraud; for example unethical mortgage, credit card, and other financial product. Other people who benefit from the regulation are the investors. Financial and security professionals like Chris Brummer have tried their best to ensure that there is transformation of the regulation for the benefit of the investors. Regulations are also necessary as it ensures that the companies do not engage in excessive risk-taking. Regulations also control the monopolies to ensure that they do not abuse their powers. If not monopolies are not monitored thy may offer default product and overcharge them.
There are three main types of regulators of the financial market. The first type is called the bank regulator who functions examine the whole banking system and make sure there is enough capital and no potential threat. The consumer regulator ensure that no overcoming of the credit cards. Financial market ensure that standard is maintained in the stock market.