The Impact Of Financial Regulations On Economic Growth And Development Of Financial Markets

We now know to keep financial regulations in place to prevent another economic catastrophe. After fall of 2008, the

This necessitated the need for development of regulatory measures for the industry. Bank regulation is a legal structure by which all financial

The general objective of this policy paper is to deeply understand the latest and most influential financial reforms and the current financial environment in U.S through relatively comprehensive analysis with regard to the Dodd-Frank Act. In doing so, I move forward to provide some suggestions on improving the relevant legislature.

Morrison suggests that government should try to make regulations that can make TBTF policy effective rather than, try to end the policy, which is impossible. Morrison discusses the role of the policy in designing suitable capital regulations, in the restriction of bank scope and in institutional design. The author argues that financial institutions receive help from taxpayers and government because regulatory authorities believe that its failure would have severe effects on the country’s economy.

During the 1930s, the most prominent reason for U.S. banking regulation was to prevent bank panics and more economic disaster like those that had been experienced during the Great Depression. Later deregulation and financial innovation in industrialized countries during the 1980s eroded banks monopoly power, thus weakening their banking systems and seeming to embody the fears of post-Depression policy makers who instituted regulation in the first place. Fear that individual bank failures could spread across international borders creates pressure to harmonize bank regulation worldwide. One advocate suggests that universal banking, at least for industrialized countries with internationally active banks, would “level the playing field” by eliminating competitive advantages created by government subsidies. Although this is a valid point, one of the major driving forces behind the globalization of the banking world is the ability of banks to take

One thing US banks have in common is that they are all financial institutions regulated by the government—at both the state and federal level.

The financial crisis of 2007-2009 resulted from a variety of external factors and market incentives, in combination with the housing price bubble in the United States. When high levels of bank and consumer leverage appeared, rising consumption caused increasingly risky lending, shown in the laxity in the standard of securities ' screening and riskier mortgages. As a consequence, the high default rate of these risky subprime mortgages incurred the burst of the housing bubble and increased defaults. Finally, liquidity rapidly shrank in the United States, giving rise to the financial crisis which later spread worldwide (Thakor, 2015). However, in the beginning of the era in which this chain of events took place, deregulation was widely practiced, as the regulations and restrictions of the economic and business markets were regarded as barriers to further development (Orhangazi, 2014). Expanded deregulation primarily influenced the factors leading to the crisis. The aim of this paper is to discuss whether or not deregulation was the main underlying reason for the 2007/08 financial crisis. I will argue that deregulation was the underlying cause due to the fact that the most important origins of the crisis — the explosion of financial innovation, leverage, securitisation, shadow banking and human greed — were based on deregulation. My argument is presented in three stages. The first section examines deregulation policies which resulted in the expansion of financial innovation and

In the past, the ruling financial systems, such as agencies and laws, led to certain areas of the market without regulation. One of the areas, lacking regulation, was the protection of consumers from aggressive or “bad” financial products. In this sense, Title X of the Dodd-Franck Act creates a new regulatory agency, the CFPB, whose mandate and mission is

Dodd-Frank Wall Street Reform and Consumer Protection Act that was signed into law in July of 2010 sparked bitter controversy. Appropriately argued by American Banker’s Capitol Hill reporter Victoria Finkle, Dodd-Frank is viewed as either a “landmark law that reined in the biggest banks” or an “economy-crippling overreach that burdened small institutions.” The Act intends to tighten financial regulation in the U.S., hoping to prevent the repeat of another financial crisis. Impetus for Dodd-Frank stemmed from the bailout of financial institutions deemed “too big to fail” and the moral hazard it created.

One of the primary factors that can be attributed as to have led the recent financial crisis is the financial deregulation allowing financial institutions a lot of freedom in the way they operated. The manifestation of this was seen in the form of:

Regulatory environment consist of several laws and regulations that has been developed by federal, state, and local governments in order to limit control over business practices. The regulatory environment plays an important role in the positive operation of the financial sector and in the efficient management and integration of capital flow and domestic savings. “The value of the claims of financial institutions on borrowers is dependent upon the

Banks and financial industry make money from taking risks, Insurance industry make money by “insuring against risk. (Property, 2013). The Federal government regulate the financial and banking industry very heavily. Over the years, these regulations became more and more lax (Property, 2013). Some regulations were weakened or eliminated and supervision of these industries were reduced (Property,2013). “Federal authorities” decided to let these industries “self-regulate”, which “meant letting everybody do anything they wanted” (Property, 2013). Insurance Industry did not feel the same effects. Regulation of

Deregulation is believed to be one of the major factors that led to the 2008 Financial Crisis. Deregulation refers to the reduction of governmental influence in an industry in order to create more competition (“Deregulation”, 2015). The reduction in government influence creates a more competitive market that

The purpose of this paper is to show that the “regulatory capture” has played a role not easily measurable in causing the global financial crisis. To illustrate this, the first step will to describe the “regulatory capture” in its three possible qualifications; then, I will explain, providing some examples, how each of these categories played a possible role in posing the basis for the financial crisis. While illustrating the different forms of capture I will present some questions that leave space to different answers. Finally, I will conclude that the regulatory capture have surely played a role in generating the crisis, but it is not possible to evaluate the effective role it had in causing it.

Financial systems and financial regulators are entities setup by the government of a country to ensure the availability and flow of financial resources in a fair and lawful manner without exploitation or monopolization of the resource by individuals or organizations. The task of ensuring the availability of finance and its transference is taken up by the financial systems of a country while the task of monitoring and regulating is taken up by the financial regulator.