Bank regulation

Bank regulation is the form of government regulation which subjects banks to certain requirements, restrictions and guidelines. This regulatory structure creates transparency between banking institutions and the individuals and corporations with whom they conduct business.

Overview

Bank regulation is a form of government regulation that applies to the activities of banks and banking industry. This regulatory structure creates transparency between banking institutions and the individuals and corporations with whom they conduct business. The objectives of bank regulation include ensuring the stability and integrity of the financial system, preventing bank failures, and protecting depositors.

History

The history of bank regulation dates back to the 19th century with the introduction of banking laws that aimed to maintain the stability of the financial system. The Great Depression in the 1930s led to a significant increase in bank regulation, with the introduction of laws such as the Glass-Steagall Act in the United States.

Types of Bank Regulation

There are several types of bank regulation, including prudential regulation, which is designed to reduce the level of risk to which bank creditors are exposed. There is also conduct of business regulation, which is designed to ensure that banks treat their customers fairly.

Regulatory Bodies

In most countries, bank regulation is carried out by a government department or agency, such as the Federal Reserve in the United States, the Bank of England in the United Kingdom, or the European Central Bank in the European Union.

Challenges and Criticisms

While bank regulation is generally seen as necessary for the stability of the financial system, it is not without its challenges and criticisms. Some argue that excessive regulation can stifle innovation and competition, while others argue that too little regulation can lead to financial crises.

See Also

• Financial regulation
• Banking law
• Central bank