FINANCIAL REGULATION

Cases For and Against Financial Regulation



Cases For and Against Financial Regulation

Case 1: The Case for Financial Laissez-Faire

Case 2: The Appropriate Role of Bank Regulation

Introduction

In the above cases, we are going to have an argument for and against of Financial regulation of Laissez-Faire and Bank Regulations. In the developed world today have all taken a laissez-faire capitalism, market economy and state intervention-oriented Economic policies, have had achievement have furthermore the problem that a lone verified that any kind of economic policies will not effectively to explain all the problems in economic procedure, this item reconsiders both the idea of output and Development method, to verify that only the blend of the two is to encourage economic development require to take a sensible economic policies. (Mishkin, 2005, pp. 33-40)

Financial markets today are the biggest markets in the world. The foreign exchange market turns over US$1.2 trillion every day, approximately one quarter of annual world exports. The regulation of financial markets thus anxieties us all.

Financial markets enlist in the exchange of house rights. Financial assets are derivatives of physical or genuine assets, derivatives being property rights of property privileges that are not "lumpy" or asset exact, and transactions charges in them being smaller than transactions in genuine assets.

The first thing to recall about financial goods is that they are all characterised by the law. Therefore, all financial transactions are about transactions in legal products, under procedures regulated by rules or laws. Even financial organisations are strictly talking legal constructs. To reword another French philosopher: Man is born free, but after that he is bound by the law. (Stiglitz, 1994, pp. 141)

 

Arguments for and contrary to Financial Regulation

We can regulate goods, purposes or organisations or a blend of all three. Problems originate when we have overlapping regulatory terrain, vying regulatory agencies and bewildered regulatory objectives. There are furthermore arguments for and contrary to the engrossment and affray in regulatory agencies. A good demonstration of a one-stop regulatory bureau is the Monetary Authority, which blends the regulation of the banking scheme, the securities market and the insurance industry in one institution. At the other end of the spectrum, the US banking sector is regulated by not less than four distinct agencies, the Federal Reserve system, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the state banking commissioners. Since US banks are progressively committed in securities localities, their purposes are furthermore subject to the Securities and Exchange Commission (SEC) and buyer lobbies. Regulation may be founded on merchandise kinds such that each regulatory administration focuses in one financial product. Under this structure, a securities controller will focus in the oversight of securities activities, irrespective of the kind of financial institutions that are bearing out this business. (Greenbaum, 1992, pp. 227-245)

Functional regulation is usually undertaken by two distinct regulatory bodies, a shareholder defence arm and a systemic stability arm. The shareholder protection arm agreements with retail depositors and little investors to double-check equitable perform, equitable ...