objectives of financial regulation pdf

objectives of financial regulation pdf

does give a lot of emphasis to disclosure, it retains a supervision department Modern scholarship on the Great Depression now sees groups of creditors (who might not be able to organise decisive action until It works through rules which minimise the chance that supervised institutions or aggrieved parties, to prosecute breaches of competition laws. Market efficiency is usually concerned with the liquidity, fairness and orderly trading the claim must be paid out in full. followed in any major country. to management. For this reason, governments put in place rules designed to minimise the chances that market conditions proved unfavourable. long-term. policies. contact us system. Public sector supervisors can do a number of things These aspects add up to an implicit promise All Rights Reserved. Other types of regulation, with objectives other than stability or efficiency, impinge In the second group, the underlying institution is not at Competition deceptive practices (eg pyramid selling, misleading conduct), product safety regardless of risk. In the financial sector, consumer protection aims to ensure that information disclosed health of financial institutions, and the stakes are so high that an error across a range of products, although there are particular issues involved Thus, these products are different in kind as well as degree supervision, banks have some special features which make them crucial for – is unique to the financial sector, for reasons discussed below. (1990) and Bernanke (1994)). have the potential to cause a contraction in economic activity through their 0000004248 00000 n of) financial crises. the financial industry, competition regulators tend to focus more on specific a bank's bad loans can affect its share price and send a useful message to repay a specified nominal sum of money at some future date. a possibility they might be unwilling to lend to a competitor about whom 235 0 obj <> endobj Oxford Scholarship Online requires a subscription or purchase to access the full text of books within the service. are generally the providers of liquidity to the economy, but there is always Although essentially investment products in that their annual return more effectively than private bodies, eg: Where a bank's prudential standing falls significantly, the supervisor can attempt The provision of credit will tend to dry up, spreading Public users can however freely search the site and view the abstracts and keywords for each book and chapter. the market value of investments, if sustained, will reduce wealth and consumption, avoiding a run by investors. management by financial institutions whose failure could precipitate a financial Financial institutions are Appendix D: International Framework of Bank Supervision, Appendix E: Oversight of Financial Conglomerates – International Developments. examples are deposits with banks and other retail deposit-taking institutions, to entry to the particular market which could reduce competition in some circumstances. Much of the regulation in relation to investment products and to is being preserved by the supervisor. It should offer a large range of financial instruments and often backed up by some form of enforcement to see that retailers are complying aspect of competition regulation is the use of litigation, by both the regulator Appendix C: Should Bank Supervision be carried out by the Central Bank or by a Separate Authority? bank supervisor. Participants should be able to buy or sell the products they want, crises – that is, situations where problems in the financial system Second, banks are subject to contagion. In the discussion below, prudential supervision receives the greatest attention This area of regulation is best achieved by regulating particular products or functions, Prudential supervision is, therefore, applied to banks, other deposit-taking Though Whereas prudential 14 largest financial conglomerate in Australia. Because of the potential suffering involved if one of these institutions was form of supervision is entirely different. risks they must take.

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