...Banking Regulation Page 1 Owning a home is part of the 'American Dream'. It allows people to take pride in a property and engage in a community for the long term. However, homes are expensive and most people need to borrow money to get one. Conditions were right for many people to achieve that dream in the early 2000s, mortgage interest rates were low, which allow you to borrow more money with a lower monthly payment. In addition, home prices increased dramatically, so buying a home seemed like a sure bet. Lenders understood that homes make good collateral, so they were willing to participate. In 2007, the US economy entered a mortgage crisis that caused panic and financial turmoil around the world. The mortgage crisis was a result of too much borrowing and flawed financial modeling, largely based on the assumption that home prices only go up. Greed and fraud also played important parts. Banks offered easy access to money before the mortgage crisis emerged. Borrowers got into high risk mortgages such as option-ARMs, and they qualified for mortgages with little or no documentation. Even people with bad credit could qualify as subprime borrowers. Fraud on the part of homebuyers and mortgage brokers helped make the mortgage crisis more serious. Mortgage applications were not checked for accuracy as well as they should have been. This is what started the subprime mortgage crisis, popularly known as the “mortgage mess” or “mortgage meltdown,” came to the public’s attention...
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...CHAPTER ONE INTRODUCTION 1.1 Background Banking reached colonial Africa through the activities of colonial merchants, and the first bank in West Africa was established in 1894, that is the British Bank for West Africa (BBWA), which extended its operations to Ghana soon after in 1896. In Ghana, the Bank of Ghana is responsible for the banking sector. The Bank of Ghana was established in 1957 to oversee the health of the nation’s financial sector. Presently the Bank of Ghana is empowered by the banking act of 2004, Act 673 (amended in 2007) and the Bank of Ghana Act 2002, Act 612 to regulate banks in Ghana. The mission of the central bank is “to pursue sound monetary and financial policies aimed at price stability and create an enabling environment for sustainable economic growth.” In maintaining a stable banking industry, the Bank of Ghana ensures that banks playing a part in the pursuit of its goals are well leveraged to withstand any unforeseen circumstances. One way the central bank does this is to ensure that banks have capital adequacy to a certain level through the regulation of the minimum capital requirement. The issue of the minimum capital requirement, its increases and implications has always been an issue of hot debates amongst economists, and even politicians. The minimum capital requirement is the minimum level of security below which the amount of financial resources should not fall (European Parliament legislative resolution of 22 April...
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...After the Great Depression on October, 1930 and the sudden collapse of the United States economy in December of the same year, more than 9000 banks which is approximately 1/3 of the bank in the United States failed in the following 3 years. To reform the banking system and the United States economy, several acts passed including Banking Act of 1933 and 1935, Bank Holding Company Act of 1956, International Banking and Financial Institutions Regulatory, Financial Institutions Regulatory and Interest Rate Control Act and Right to Financial Privacy Act of 1978 between 1930’s and 1970’s as part of Depression era banking legislation. Each Act has its unique impact on the United States banking system and the economy. Also known as the Glass- Steagall Act, the Banking Act of 1933 main purpose was established Federal Deposit insurance Corporation (FDIC) as a temporary agency, separated commercial and investment banking as different lines of commerce and founded the Federal Deposit Insurance Corporation for insuring bank deposits. The Act has a significant impact on the U.S. banking system. The establish of the FDIC required all federally chartered banks and all state banks that were part of the Federal Reserve system to join and regulate by it. Moreover, the Act also permitted the Fed to allocate the currency. The FDIC insured bank deposits separated commercial banks from investment banks. Commercial banks were insured and allowed to accept deposits, but it couldn't underwrite...
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...Team n°4: FS5 Group 2 Regulation of Banking and Financial Market January 16th, 2013 ISEG BANK is a new French credit institution authorized in France by the Autorité de Contrôle Prudentiel - ACP -. The bank wishes to provide both French and European clients with investment services.Please advise on : 1. What are the applicable prudential rules in providing investment services across the European Economic Area ? 2. What are the conduct of business rules to be observed in relation to client protection.Make sure your answer are accurate from a regulotary perspective | I What are the applicable prudential rules in providing investment services across the European Economic Area ? As stated in the topic sentence, the credit institution that represents the ISEG Bank (IB) is under the control of the ACP (Prudential supervisory authority) which is chaired by the Governor of the France Bank. The ACP main missions are: * Contribution to the stability of the financial sector * The protection of investors * Strengthening the influence of France on the European and international scene IB wants to provide investment services to investors in France and Europe, so we will look for areas of application that represents the European Economic Area. The directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 is about the applicable prudential rules to credit institutions as discussed here, but also the rules governing their activities...
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...with the banking behemoths. Banks should then comply with the new capital requirements agreed by finance ministers by January 1, 2019. The question is, however, whether this is the right path to choose and whether these regulations will be able to prevent the world from any future financial markets crisis. So far, the proposed numbers themselves could hardly be described as tough, as the bounce in bank shares testified. Also, it seems that many important issues are not being addressed at all. (Plenty) But what are the issues that should be addressed? What would be the ideal regulatory state and is it possible to ever achieve it? Let us, first, start with our idea of the “ideal” international financial regulatory plan. After having researched various proposals for the international financial markets regulations, we reached a conclusion that finding the ideal path is going to represent a very difficult task and that none proposed regulation will be able to fit all the states. As mentioned in the article “Financial regulation: More questions than answers” which was posted in Businessline in the end of July, due to the variations in institutional legacies, traditions and systems in individual countries over the world, no one size can fit all. Also, however, we believe that as far as financial stability is concerned within any kind of arrangement that is deemed fit in a particular country, there is no need for a central bank to have a lead role. (Opinion) Any regulations will then...
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...In today’s society banks are an essential part to the continuation of a growing economy and regulations ensure that they are run in such a manner that they should be functioning for years to come. According to the Business Dictionary a regulation is a principle or rule (with or without the coercive power of law) employed in controlling, directing, or managing an activity, organization, or system. Banks are regulated to give guidelines as to how the bank should be run to ensure their services are available for years to come. One main reason why banks are regulated is to protect and prevent the bank from fraudulent activities. The regulators protect the consumers from possible fraudulent activities as small as misleading advertisements on the banks part to major acts as money laundering. The possible effects of poor regulations in the banking sector was clearly depicted in the case of Stanford where, since the bank was poorly regulated Mr Stanford had the opportunity to steal millions of dollars from the customers and as a result when he was brought to justice the ripple effect it had was devastating since many individuals lost their money in his ponzi scheme. The regulators also ensure that the banks do their part in giving their consumers a return on their savings and aren't depriving the consumers of their basic benefits. Another reason of why banks are regulated is to reduce the systematic risk, where this is the risk of the bank completely failing. It is important that a...
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..."Impact of Government Regulation" Please respond to the following: •* From the scenario for Katrina’s Candies, take a position as to whether government regulation is constraining or enabling in this situation, as it relates to the operational efficiency of the company. Speculate on the fundamental manner in which government regulation could impact the shareholders’ wealth and profitability. Considering the scenario for Katrina’s Candies, I believe the government regulation is enabling in this situation, as it relates to the operational efficiency of the company. The government’s intervention in the US market place process is to; provide for a market that is competitive by keeping monopolistic and other anti-competitive tactics at bay, protect the public interest and enable and encourage innovation. These are accomplished through the antitrust regulation statues and their enforcement which prohibits monopolies as stated in the Sherman Act, 1890 (McGuigan et al., 2014). The presence of anticompetitive business practices of collisional price fixing, wholesale price discrimination, exclusive dealing and tying contracts, anti-merger regulations, and interlocking directorates are specified in the Clayton Act, 1914. The Federal Trade Commission is the nation’s consumer protection agency that works for the consumer to prevent fraud, deception and unfair business practices in the marketplace. Government policies are there to ensure that products are available to the consumer at lower...
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...of law is peacekeeping. These laws provide guidelines for proper conduct in resolving disputes. Commerce Power Congress has the power to regulate commerce among the states. They exercise this broad power to pass laws regulating and affecting intrastate commerce in any way. This commerce power regulates persons and products related to the flow of interstate commerce. Congress has the authority to regulate channels of commerce such as railways, highways, and shipping vehicles. They also have the power to regulate any activity that has substantial economic effect on interstate commerce such as hotel and restaurant activity (Melvin, Chapter 2, 2011). Law Establishing Banking In 1791 President George Washington signed a bill establishing the Bank of the United States. The Bank of the United States or First Bank, the first federally chartered bank, opened for business in Philadelphia on December 12, 1791. Before this time each state had...
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...Crises reforms and regulations The global financial crises displayed various weaknesses in the financial system. Ever since the crises, there have been sincere efforts in trying to eliminate or reduce the chances and impact of a future crisis. Four main areas of reform were identified by the international policy makers and sufficient work has been done to implement them (The Regulatory Response to the Global Financial Crises, 2014). Although Australia has not been affected as much as the north Atlantic countries, it still operates in the global environment. A part of regulatory reforms includes managing and monitoring systemic risk. Australia has been trying to do that through various entities such as the RBA, APRA and ASIC. Australia has also implemented reforms related to derivative trading, which are being traded more and more despite their high level of risk. Even though the reforms and regulations that were and going to be implemented, improved the safety of the financial system, there will never be a one hundred percent guarantee that there will be no future crisis. The G20 summit in 2008 was different from the prior summits in that it constituted of the leaders of the countries instead of Finance Ministers and Bank Governors (RBA, 2012). The leaders agreed on four areas of reforms which are: Strengthening Prudential Regulatory Standards (Basel III), addressing too big to fail institutions, reforms to OTC derivatives market and shadow banking. The entities that...
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...will follow will include the reasons for the global financial crisis and what steps the government is taking to overcome or recover from the crisis. One of the main reasons emphasized in the following text for the crisis is lack of effective regulations. Moreover the most important financial alteration that various committee’s around the world are taking is strengthening the regulatory requirements on the financial institutions. Hereafter it could be settled that government intervention could have played a huge role in avoiding the crisis. Many countries around the world have to decide whether to regulate or not to regulate their accounting standards. Supporters of regulation usually state that the free market notion states that accounting information is like an economic good so it is best to leave the markets to decide what and how much information is needed. This will help achieve efficient market system, however this kind of a system exists only in theory and not in reality, and so then what is the point of a free market system when it cannot be efficient? (Y. Hong, 2007) The rewards of free market system are realized only when it is executed in isolation. But in reality, markets cannot be left completely on its own and some regulation or government intervention is required. Government intervention even at its minimum will not be able to achieve efficient markets and thus it is better to have a well regulated system. Free market system has led to market failures that have...
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...Indian Financial Code Summary The Indian financial system is suffering from the problems of lack of financial inclusion, growth of unregulated shadow market, slow pace of innovation and the challenges of financial integration. It is felt that the present code of the financial sector need to be reviewed and altered, while keeping in mind the present needs of the economy. This is because most of the laws are very old, there are overlaps and inconsistencies, and there is lack of clarity in terms of regulations due to the presence of a number of regulators. It is also argued that the laws in India are traditionally evolved on a problem by problem basis. With the advent of the New Economic Policy in 1991, substantial economic liberalisation took place in India. Between 1991 and 2002, progress was made in four areas. Firstly, capital controls were substantially reduced to give Indian Firms access to foreign market. Also, a new pension system was evolved and the monopolies of the public sector in the insurance field were broken up. This led to the formation of the new Insurance regulator, Insurance regulator and Development Agency. Additionally, significant increase in the equity market as a mechanism to raise finance by firms led to the formation of the financial market regulator SEBI. Also infrastructure institutions, National stock exchange and National Security Depository were also set up. Although, these moves were taken up in the right direction but they were considered to be...
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...Module Title |Fundamentals of Securities and Futures Regulation | | |Module Code |BAF2407 | |Module Year |2010-2011 | |Module Value |3 | |Module Hours |Lecture | |30 | | | |Tutorial |15 | | | |TOTAL | |45 | | | | | | | | |Pre-requisites |Nil | |Co-requisites |Nil | |Module Aims |To provide students with an understanding of the rules and regulations in regulated | | |activities in Hong Kong. | |Exemption Criteria ...
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...objectives of regulation, the role of the regulator and the techniques that are employed in regulating firms and individuals who engage in investment business. 3.1 Background: the financial crisis and regulatory reform 3.1.1 Responding to the financial crisis In the UK, as elsewhere, the onset of the financial crisis exposed deficiencies in financial regulation and led to calls for regulatory reform. The Treasury Select Committee1 led the way, with its hearings into the collapse of Northern Rock exposing serious deficiencies in supervision and risk management.2 In October 2008, the Chancellor of the Exchequer asked Lord Turner, the newly appointed chairman of the FSA, to review the causes of the crisis and to make recommendations on the changes in regulation and supervisory approach needed to create a more robust banking system for the future. The Turner Review3, published in March 2009, made a 1 The Treasury Select Committee is a Parliamentary (House of Commons) committee that scrutinises the activity of the regulatory authorities in the UK. 2 See House of Commons Treasury Committee, The Run on the Rock HC 56-1 (Fifth Report of Session 2007-08). 3 FSA, ‘The Turner Review, A regulatory response to the global banking crisis’ (March 2009) at http://www.fsa.gov.uk/Pages/Library/Corporate/turner/index.shtml. See also the FSA publication that accompanied the Turner Review: FSA Discussion Paper 09/2 ‘A regulatory response to the global banking crisis’ (March...
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...Period is the tool that is used to determine how long it takes for the project to recover its initial costs for funding the project. The Net Present Value shows how the present project will affect the company. The Internal Rate of Return reveals the discount rate if the NPV equals zero. The antitrust law is a federal and state law regulation of corporations. The law insures that company does not grow too large which may prevent the growth of other corporations. The government believes that without this law that prices can become fixed and demand will be unfair in the market. In Assignment 3, I discussed the publicly traded company, Bank of America Corporation, and how the corporation deals with competition and change. In this paper, I will discuss the government regulations for mergers, the possible merger that could occur, and how the merger could be profitable. Explain why government regulation is or is not needed, citing the major reasons for government involvement in a market economy. Provide support for your explanation. Governmental regulation is highly important in today’s economy. There are federal and state regulations that are set to ensure the common wealth and beneficial care of the people. If a company was also involved in global marketing, they would need to...
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...Economic Interest Theory and Regulation The theory suggests that regulations are set of policies driven by forces of supply and demand. The government is placed on the supply side while the interest groups on the demand side. The theory suggests that regulation is developed by the industry and that the objective of regulations is to create advantages to the industry concerned. This theory was developed in 1971 by Chicago theory of government and the economic theory of regulation (J. G. Stigler, The Theory of economic regulation, n.d. pg 4). Characteristics of economic interest theory The theory suggests that it is the industry which designs the regulations to be adopted in the market. The industry sets the regulations for the benefit of its members (J. Hertog, General Theories of Regulation, 1999, pg236). It also operates these regulations and there are no external mechanisms involved. The government allows the stakeholders in the industry to participate in decision making concerning economic matters that affect the sectors of the economy. The theory suggests that the representative groups in the government decision making should be small in size so as to reduce the running costs. The theory suggests that producers can organize themselves more readily than consumers. It suggests that producers can easily regulate their activities faster compared to the consumers. The theory suggests the phenomena of cross-subsidization. This is where regulations which have been put across benefit...
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