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Post Crisis and Regulatory Response on Banking Regulation

In: Other Topics

Submitted By lioujiayi
Words 3230
Pages 13
The failure of banks can always be prevented by numerous ways. The main technique is to establish the system of regulation in order to reduce the risk of bank failing. With the regulation, the banks would be authorised on the basis of meeting minimum standards, and will continued to be supervised to ensure that certain standards or requirements are maintained. This would instill more confidence to the economic actors.[1] The risk of the banks become poorly capitalised, fraudulently or incompetently run compared to if no system of external regulation were take place will be lower. Unfortunately, the regulation does not perform well as an alternative for the regulation by the market, nor replace the need for management to take prime responsibility for bank’s activities. As time goes by, there has been increasing recognition of both the limitation of regulation and its role. [2] Perhaps, the market discipline will play a greater role in financial and to bring benefits in future. Nevertheless, an effective system of regulation still play an important role in minimising the risk of bank failure and to maintain consumers’ confidence in the banking system.

Banking Regulation: Objectives and Rationales

The main objectives of banking regulation are to protect the investors and provide prevention of bank failures and depositor runs as well as minimisation of the risk of contagion that these may create.[3] The term regulation is used in a broad sense, Goodhart used it to refer to the different ways in which the activities of banks are monitored and controlled by governments and financial regulatory bodies.[4] Since it is difficult to establish the clear meanings of the term of regulation, there are two approaches taken by Evans[5] and also Hadjiemmanuil.[6] Beside, it is also important to understand the crisis management techniques available to bodies such as Financial

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