Financial Regulation And The Financial System Essay

Financial Regulation And The Financial System Essay

Length: 737 words (2.1 double-spaced pages)

Rating: Better Essays

Open Document

Essay Preview

Financial regulation is a form of regulation or supervision of the financial services industry, aiming to maintain the integrity of the financial system. Deregulation was experienced mainly in the worlds of banking and building societies, also affected the structure of banking sectors. To some degree, self-regulation caused a lot of adverse effects on consumers, it aroused a hot topic for people on consumer protection. Split capital investment trusts are investment trusts that companies raise funds to invest in other companies. They can benefit from both dividend income and capital growth. However, when share prices suddenly decrease, many trusts did not have enough money to pay, some trusts borrowed heavily to buy more shares. A lot of people have lost their money, therefore is very hard to determine the extent of consumer responsibility for their loss. It caused moral hazard – the existence of a powerful regulator and an ombudsman leads small investors to feel their investment are secure. They do not, as a result, always read the small print attached to financial products, even though it could be argued that the high rates of return offered should have alerted investors to the degree of risk they faced. (Howells & Bain, 2007)
In addition to these, the negative side of regulation seriously influenced the producers.
Regulation creates compliance cost (the costs of adhering to the regulations) for producers (Howells and Bain, 2007). Due to increase the cost of capital to borrowers by increasing the cost of finance, increase unit costs of production in the financial sector, it is obviously raise the input but produce less than estimated. In other words, increase the unit of producing financial services, which increases the cost of ...


... middle of paper ...


...n are also commonly advanced, with different emphases in different countries. In addition, in the US, there are strong historical roots of financial institution that people have no faith in, many kinds of regulation have been proved as necessary to protect consumers from excessive price and discrimination; to prevent an undue concentration of economic and even political power, and to encourage the allocation of credit to favoured industries, activities, and regions. Its therefore seems that none of the criticisms point out sufficient reason to deny all self-regulation, it is better to take into account all of the factors in decision making over the amount and form of regulation.
Consumers play a crucial role in the whole financial system, therefore consumer protection must be regarded as a top priority to be carried out and well handle it with producer by regulation.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

World Financial Crisis Requires Regulation of Entire Financial System Essay

- ... p. 1) The concept of a connection between macroeconomic concerns and prudential regulation was first described in anECSC report in July 1978. However, the term “macroprudential” was first used a year later at a meeting of the Cooke Committee, where the main topic was the potential collection ofdata on maturity transformation in international bank lending. (Clement. 2010. p. 2) The second occasion on which the term was used was in an unpublished document put together bythe Bank of England on October 9th 1979....   [tags: economist, macroprudential, policy]

Free Essays
773 words (2.2 pages)

Essay on Financial Self Regulation System : Commercial Bank

- Intermediation is a major weakness in financial self-regulation system. Commercial bank is the special corporation that manages currencies. It is the largest loaner and debtor as the agency of credit and payment and the organization that creates credit tools. Sometimes in live, many customer deposits their money into the bank. The deposit is the basis of the banking business. Commercial bank general have been heavily dependent on making loans to generate profit. For example, “Suppose $100 is deposited in the banking system....   [tags: Bank, Debt, Loan, Money]

Better Essays
708 words (2 pages)

Thailand Financial Institutions Essays

- 1. Introduction Thailand is an emerging Southeast Asian financial market, comprising an increasingly perfecting network of markets and institutions, which provide a relatively wide range of financial products and services towards domestic and international investors. Thailand financial system, since established in 1940 [1], has experienced the cautious and pragmatic management period in 1960-1970s, the financial liberalization period in late 1980s and early 1990s [2] and the restructuring period after1997 Asia Financial Crisis [3]....   [tags: banking system, financial system]

Better Essays
1407 words (4 pages)

Financial Regulation in the UK and Ireland Essay

- Financial Regulation in the UK and Ireland There has been considerable changes in the regulation of financial markets in the UK and other countries. Why is this. Financial markets tend to be more highly regulated than other markets. Explain why. In May 1997, the British Chancellor of the Exchequer made the decision to move the responsibility of supervision of financial institutions into the hands of a new regulatory authority, the Financial Services Authority (FSA). This new authority replaced the Securities and Investments Board and took over responsibility for the supervision of banks, listed money market institutions and clearing houses from the Bank of England....   [tags: Finance Business Essays United Kingdom]

Better Essays
2163 words (6.2 pages)

Essay on The Need for Regulation in Financial Reporting

- The Need for Regulation in Financial Reporting Discuss: Since 1990 the Accounting Standards Board has produced Financial Reporting Standards (FRSs) It has been performing a very important role in the economics market as the published accounts are the essential sources of information about the organizationsÂ’ performance which is available of the both internal and external user group in large organizations. l Financial Reporting Regulations in UK Regulators that establish requirements for the reporting of financial results have recently issued several new initiatives targeted at the practices of many firms....   [tags: Financial Reportings United Kingdom Essays]

Better Essays
1542 words (4.4 pages)

Essay on The Malaysia Financial System

- INTRODUCTION The Malaysia financial system is structure into two major categories it is financial institution and financial market. But I will cover about financial institution only. The role of financial institutions is to resolve the problems caused by market imperfections. Without financial institutions the information and transaction costs of financial markets transactions would be excessive. Under financial institutions there are two type first banking system and non-bank financial intermediaries....   [tags: financial market, risks, institutions]

Better Essays
2136 words (6.1 pages)

Regulation of Banking and Financial Services Essay

- Regulation of Banking and Financial Services The Failure Process Imposed Upon Financial Institutions The concept of systemic risk sprung to the foreground of the public’s consciousness during the financial crisis of 2007-8 as the Too Big To Fail (TBTF) banks were bailed out by the various US Federal Government agencies e.g., US Treasury via the Troubled Asset Relief Program (TARP) and the US Federal Reserve via Quantitative Easing (QE). However, as it turns out, the concept of systemic risk is not so easy to define in legal terms—as illustrated by the difficulty in nailing down the definition by US Congress via the Dodd-Frank legislation or by the US Treasury and the Federal Deposit Insuranc...   [tags: Depository Institutions, Geographic Expansions]

Better Essays
1221 words (3.5 pages)

Essay about Financial Globalization and Risk

- Introduction: From the beginning of the 1990s, the global financial system has entered a phase of unprecedented restructuring, marked by the increasing integration of financial markets and increased economic interdependence. This process, known under the name of financial globalization allows companies better access to financing, offers investors a greater possibility of investment and thus increases the liquidity of the global economy. However, this financial globalization has enormous risks. Indeed, creating an interconnection between national financial systems, it facilitates the transmission of shocks, contagion ....   [tags: Financial Globalization]

Better Essays
3149 words (9 pages)

Financial Instability Essay

- Financial Instability The soaring volume of international finance and increased interdependence in recent decades has increased concerns about volatility and threats of a financial crisis. This has led many to investigate and analyze the origins, transmission, effects and policies aimed to impede financial instability. This paper argues that financial liberalization and speculation are the most reflective explanations for instability in financial markets and that financial instability is likely to be transmitted globally with far reaching implications on real sector performance....   [tags: Financial Market Finances Accounting Essays]

Better Essays
3554 words (10.2 pages)

Business Regulation Study: Bates Versus Alumina Inc. Essay

- Business Regulation Study: Bates Versus Alumina Inc. Alumina Inc. has found itself on the receiving end of a lawsuit alleging that the company has repeatedly contaminated the waters of Lake Dira. A site study report completed by Alumina reveals the polycyclic aromatic hydrocarbons (PHA) levels are lower than the prescribed level of 5 milligrams per liter for all hydrocarbons ( University of Phoenix a , 2004). Although Alumina is not currently contaminating the lake, five years ago, the company was found to be in violation of environmental discharge norm during a routine EPA compliance....   [tags: Case Study, Business, Regulation, solution]

Free Essays
1812 words (5.2 pages)