This essay will examine and analyse regulatory intervention within major UK banks such as HSBC Bank Plc and Standard Chartered in the United States, the intervention’s outcomes and the relationship between these banks and the US regulatory bodies.
The intension of financial regulation is to protect savers, borrowers and investors that participate within financial markets and to pursuit financial stability within a country by achievement of equilibrium as this is a vital component of economic growth and development.
In the US some agencies regulate particular types of institutions for risky behaviour, some broadcast rules for certain financial transactions no matter what kind of institution engages in them and other agencies enforce existing rules. These regulatory activities are not necessarily mutually exclusive.
Traditionally U.S. banking regulation is focused on prudence and regulates for safety and adequate capital. Additionally, banks are given access to a lender of last resort (Federal Reserve (Fed)), and some bank creditors are provided guarantees such as deposit insurance. Regulating the risks that banks take is believed to help smooth the credit cycle.
Post 2008 Financial Crisis, The Dodd-Frank Act created the Financial Stability Oversight Council (FSOC) which authorised monitoring of systemic risk and decreased number of bank regulation agencies. The Dodd-Frank Act allowed and authorised the Fed and the Federal Deposit Insurance Corporation (FDIC) oversight over the largest financial firms. Fed’s objectives of supervision is to evaluate the overall safety and financial soundness of the banking organisation which includes assessment of organisations risk management systems and controls, compliance with banking law...
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http://www.investopedia.com/terms/b/bearer_share.asp
http://www.sfo.gov.uk/press-room/latest-press-releases/press-releases-2013/deferred-prosecution-agreements-consultation-on-draft-code-of-practice.aspx
http://money.cnn.com/2012/12/10/investing/standard-chartered-sanctions-iran/
http://www.fas.org/sgp/crs/misc/R43087.pdf
http://economic-legislation.blogspot.com/2013/06/who-regulates-whom-and-how-overview-of.html
Who Regulates Whom and How? An Overview of U.S. Financial Regulatory Policy for Banking and Securities Markets, Edward V. Murphy, 28 May 2013, Ebook
http://www.reuters.com/article/2014/01/07/us-jpmorgan-madoff-deal-idUSBREA060JL20140107
http://online.wsj.com/news/articles/SB10001424052702304887104579306323011059460
http://www.federalreserve.gov/pf/pdf/pf_5.pdf
One year ago, on September 8, 2016 the Consumer Financial Protection Bureau(CFPB), the Los Angeles City Attorney and the Office of the Comptroller of the Currency (OCC) fined Wells Fargo Bank $185 million, alleging that more than 2 million bank accounts or credit cards were opened or applied for without customers' knowledge or permission between May 2011 and July 2015. This essay will discuss the Wells Fargo scandal by explaining how the event happened and describing how the organization approached handling a response to the crisis. This will be seen, firstly by describing the how the scandal happened, and what were the causes, secondly by discussing the reaction of the company in front of the situation, how they dealt with the crisis and then
In addition, the Federal Reserve did badly on supervision of the financial market. Many banks did not have enough ability to value their risk. The Federal Reserve and other supervision institution should require these banks to enhance their ability of risk valuing.
The job of the FDIC is to provide deposit insurance for members of the banks up to $250,000. An average of 600 banks per year failed between 1921 and 1929. During the initial years are the Great Depression many banks also failed and bank “runs” became common practice. The Glass-Steagall Act or Banking Act of 1933 held responsibility of ensuring deposits within eligible banks until becoming a permanent government agency through the Banking Act of 1935. Since the start of the corporation on January 1, 1934 no depositor has lost any insured funds. As of 2014, the FDIC insured deposits at over 6,670 institutions. Funds deposited into the banks backed by the full faith and credit of the United States Government, are secure. Without the FDIC there would be little confidence in the banking system and irregular quantities of available cash for the community. The FDIC is a successful and necessary
The global financial crisis affected the many advance economies, particularly the United States. Unemployment significantly increased, people were evicted from their homes, and the search for employment was a dead end. However, Canada was not affected with the same force as the United States: “Canada’s financial sector was less affected than most advanced economies and it had the highest bank soundness rating in the World Economic Forum surveys from 2007-2008 through 2012-2013.” Despite the relatively stable status of the Canadian economy, Canada was very much involved in the review and improvement of international financial regulations. Canada was in a position to make changes to financial regulations due to their perceived experience in the matter, as Canada escaped the crisis relatively unscathed. Canadian delegates were placed in charge of four core areas in the reformation of financial policy and, “in all these areas, Canada was able to successfully push for reforms that resonated with its experiences and interests in enhanced financial sector regulation and supervision.” This crisis, and the successful reformations that came out of it, further installed Canada as a leader in economics, firmly inaugurating them as the world’s best bankers.
The Dodd-Frank Wall Street Reform and Consumer Protection Act brought the most significant changes to financial regulation in the United States since the reform that followed the Great Depression. It made changes in the American financial regulatory environment that affect all federal financial regulatory agencies and almost every part of the nation’s financial services industry. Like Glass-Steagall, the legislation passed after the Great Depression, it sought to regulate the financial markets and make another economic crisis less likely. Banks were deregulated in 1999 by the Gramm-Leach-Biley Act, which repealed the Glass-Steagall Act and essentially allowed for the excessive risk taken on by banks that caused the most recent financial crisis. The Financial Stability Oversight Council was established through the Dodd-Frank Wall Street Reform and Consumer Protection Act and was created to address the systemic risks in the United States financial system and to improve coordination among financial regulators.
The Federal Reserve System is the central banking authority of the United States. It acts as a fiscal agent for the United States government and is custodian of the reserve accounts of commercial banks, makes loans to commercial banks, and is authorized to issue Federal Reserve notes that constitute the entire supply of paper currency of the country. Created by the Federal Reserve Act of 1913, it is comprised of 12 Federal Reserve banks, the Federal Open Market Committee, and the Federal Advisory Council, and since 1976, a Consumer Advisory Council which includes several thousand member banks. The board of Governors of the Federal Reserve System determines the reserve requirements of the member banks within statutory limits, reviews and determines the discount rates established pursuant to the Federal Reserve Act to serve the public interest; it is governed by a board of nine directors, six of whom are elected by the member banks and three of whom are appointed by the Board of Governors of the Federal Reserve System. The Federal Reserve banks are located in Boston, New York, Philadelphia, Chicago, San Francisco, Cleveland, Richmond, Atlanta, Saint Louis, Minneapolis, Kansas City and Dallas.
Major banks are cutting back on some of their legally permitted operations, such as- market making, and that has led to liquidity issues in the bond markets. Proprietary trading could become unregulated if more banking activities continue moving towards the shadow banking system. This would essentially defeat one of the main purposes of Volcker Rule. [d] The third major unintended consequence has been the degree by which the Federal Reserve has become the main regulator of the finance industry. In order to discourage future bailouts similar to the ones during the financial crisis, the Dodd-Frank Act limited the Fed’s emergency powers. However the liquidity and capital standards now imposed by Fed has purportedly become one of the most important regulatory developments of the Dodd-Frank Act.
Investment banks, Rating agencies and Insurance companies are key components of the financial market. In this presentation, I’m going to explain how these three key roles worked together to create the 2008 financial crisis.
In 1913, Wilson and Congress passed the Federal Reserve Act to make a decentralized national bank containing twelve local offices. By and large, all the private banks in every district possessed and worked that separate area's branch. In any case, the new Federal Reserve Board had the last say in choices influencing all branches, including setting financing costs and issuing money. This new managing an account framework settled national funds and credit and helped the monetary framework survive two world wars and the Great
The ability for the federal government to regulate businesses’ activity is given in the Constitution. Article 1, Section 8 is known as the commerce clause; it states, “Congress shall have the Power…to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes” (Reed, 173). Through the commerce clause, the government is able to regulate business activity by the use of administrative agencies, which is defined as “a governmental regulatory body that controls and supervises a particular activity or area of public interest and administers and enforces a particular body of law related to that activity or interest” (Administrative Agency, 1). There are two types of regulatory authority that agencies may possess; quasi-legislative and/or quasi-judicial. Quasi-legislative means that agencies can make rules and regulations that have the same impact as a law created by federal legislation. Quasi-judicial authority gives agencies the power to make rulings, just like in federal courts.
Author Unknown (1994). The Federal Reserve System: Purposes and Functions (5th ed.) Published by Library of Congress
During the 1920s, approximately 20 million Americans took advantage of post-war prosperity by purchasing shares of stock in various securities exchanges. When the stock market crashed in 1929, the fortunes of many investors were lost. In addition, banks lost great sums of money in the Crash because they had invested heavily in the markets. When people feared their banks might not be able to pay back the money that depositors had in their accounts, a “run” on the banking system caused many bank failures. After the crash, public confidence in the market and the economy fell sharply. In response, Congress held hearings to identify the problems and look for solutions; the answer was found in the new SEC. The Commission was established in 1934 to enforce new securities laws that were passed with the Securities Act of 1933 and the Securities Exchange Act of 1934. The two new laws stated that “Companies publicly offering securities must tell the public the truth about their businesses, the securities they are selling and the risks involved in the investing.” Secondly, “People who sell and trade securities must treat investors fairly and honestly, putting investors’ interests first.”2
As we are moving to the end of the course, we want to present you with the Federal Reserve System (Fed), which is the central bank of the USA. We are going to explore the roles of Fed in regularizing the economy, its function, and also the tools used in doing that. We will learn how central banks regulate the banking system and how they manage money supply in economies. We will also be presented to the financial crises lessons we can be able to understand the importance of the regulatory system; and then, we answering questions such as:
Despite that Basel rules are commonly adopted by countries, the early and effective adoption by OSFI have given Canada banks very strong capital and regulated position even during the financial crisis. Comparing with US bank regulations with overlapping responsibilities of authorizing regulators, the exist of OSFI has standardized the regulating procedures. However, the financial environment is also restricted by changing in some policies such as Volcer Rule, which restricts US banks from trading financial instruments for its own benefits and also restricted the trading and investment activities of banks in Canadian. Another regulatory changes from United States that impact Canadian banks trade is the treatment of foreign banking organization (FBOs) which Canadian banks’ branches operating in the U.S. need incorporate under a bank holding company structure Basel III capital, which may increase ilquidity risk (Association,
While banking and financial institutions have play an important role in contributing the economic growth by collecting and allocating the resources to those who in need of finance, it also can bring the financial chaos to the economy as well. Since this industry is a sentitive and fragile one, the banking superivision is required to monitor on the banking system aiming to identify and measure risks in order to protect not only the financial institutions but also the customers from the contagious risk that would happen without any alert. Moreover, banking supervision is established in order to protect depositors against avoidable losses, thereby contributing to confidence in the financial system and the