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Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system. This may be handled by either a government or non-government organization.Financial regulation has also influenced the structure of banking sectors, by decreasing borrowing costs and increasing the variety of financial products available.

Aims of regulation[edit]

The objectives of financial regulators are usually:[1]

  • market confidence – to maintain confidence in the financial system
  • financial stability – contributing to the protection and enhancement of stability of the financial system
  • consumer protection – securing the appropriate degree of protection for consumers.
  • reduction of financial crime – reducing the extent to which it is possible for a regulated business to be used for a purpose connected with financial crime.

Structure of supervision[edit]

Acts empower organizations, government or non-government, to monitor activities and enforce actions.[2] There are various setups and combinations in place for the financial regulatory structure around the global.[3][4] Leaf parts are in any case:

Supervision of stock exchanges[edit]

Exchange acts ensure that trading on the exchanges is conducted in a proper manner. Most prominent the pricing process, execution and settlement of trades, direct and efficient trade monitoring.[5][6]

Supervision of listed companies[edit]

Financial regulators ensures that listed companies and market participants comply with various regulations under the trading acts. The trading acts demands that listed companies publish regular financial reports, ad hoc notifications or directors' dealings. Whereas market participants are required to Publish major shareholder notifications. The objective of monitoring compliance by listed companies with their disclosure requirements is to ensure that investors have access to essential and adequate information for making an informed assessment of listed companies and their securities.[7][8][9]

Supervision of investment management[edit]

Asset management supervision or investment acts ensures the frictionless operation of those vehicles.[10]

Supervision of banks and financial services providers[edit]

Banking acts lays down rules for banks which they have to observe when they are being established and when they are carrying on their business. These rules are designed to prevent unwelcome developments that might disrupt the smooth functioning of the banking system. Thus ensuring a strong and efficient banking system.[11][12]

Authority by country[edit]

See main article List of financial regulatory authorities by country
Number of countries having a banking crisis in each year since 1800. This is based on www.reinhartandrogoff.com (web site for This Time is Different: Eight Centuries of Financial Folly), which covers only 70 countries. The general upward trend might be attributed to many factors. One of these is a gradual increase in the percent of people who receive money for their labor. The dramatic feature of this graph is the virtual absence of banking crises during the period of the Bretton Woods agreement, 1945 to 1971. This analysis is similar to Figure 10.1 in Reinhart and Rogoff (2009). For more details see the help file for "bankingCrises" in the Ecdat package available from the Comprehensive R Archive Network (CRAN).

The following is a short listing of regulatory authorities in various jurisdictions, for a more complete listing, please see list of financial regulatory authorities by country.

Unique jurisdictions[edit]

In most cases, financial regulatory authorities regulate all financial activities. But in some cases, there are specific authorities to regulate each sector of the finance industry, mainly banking, securities, insurance and pensions markets, but in some cases also commodities, futures, forwards, etc. For example, in Australia, the Australian Prudential Regulation Authority (APRA) supervises banks and insurers, while the Australian Securities and Investments Commission (ASIC) is responsible for enforcing financial services and corporations laws.

Sometimes more than one institution regulates and supervises the banking market, normally because, apart from regulatory authorities, central banks also regulate the banking industry. For example, in the USA banking is regulated by a lot of regulators, such as the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the National Credit Union Administration, the Office of Thrift Supervision, as well as regulators at the state level.[13]

In addition, there are also associations of financial regulatory authorities. In the European Union, there are the Committee of European Securities Regulators (CESR), the Committee of European Banking Supervisors (CEBS) and the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS), which are Level-3 committees of the EU in the Lamfalussy process. And, at a world level, we have the International Organization of Securities Commissions (IOSCO), the International Association of Insurance Supervisors, the Basel Committee on Banking Supervision, the Joint Forum, and the Financial Stability Board.

The structure of financial regulation has changed significantly in the past two decades, as the legal and geographic boundaries between markets in banking, securities, and insurance have become increasingly "blurred" and globalized.

Regulatory reliance on credit rating agencies[edit]

Think-tanks such as the World Pensions Council (WPC) have argued that most European governments pushed dogmatically for the adoption of the Basel II recommendations, adopted in 2005, transposed in European Union law through the Capital Requirements Directive (CRD), effective since 2008. In essence, they forced European banks, and, more importantly, the European Central Bank itself e.g. when gauging the solvency of EU-based financial institutions, to rely more than ever on the standardized assessments of credit risk marketed by two private US agencies- Moody’s and S&P, thus using public policy and ultimately taxpayers’ money to strengthen an anti-competitive duopolistic industry. Ironically, European governments have abdicated a key component of their regulatory authority in favor of a non-European, highly deregulated, private cartel[14]

See also[edit]



External links[edit]

Original courtesy of Wikipedia: http://en.wikipedia.org/wiki/Financial_regulation — Please support Wikipedia.
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Scroll down until you see the 'Scripting' section. Select the 'Enable' radio button for 'Active Scripting'. Click the OK button. Click the Yes button in the confirmation window. Refresh this page. Firefox 3.0. Click the Tools menu. Select Options ...
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Please complete all fields in the form to login. Username and password fields are case sensitive. If you have forgotten your username or password please use the forgotten your username/password link below. Remember me, by ticking the box you are ...
Law360 (subscription)
Mon, 28 Jul 2014 07:37:30 -0700

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In the United States, the Financial Stability Oversight Council (FSOC), and its research arm, the Office of Financial Regulation (OFR), have been assessing various risks and going about the business of identifying SIFIs, which U.S. banking regulators ...


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