REGULATION OF SYSTEM BY KASHIF SALEEM FINANCIAL REGULATION
REGULATION OF SYSTEM BY KASHIF SALEEM
FINANCIAL REGULATION • Financial regulation is a form of regulation or supervision, which subjects financial Institutions to certain requirements, restrictions and guidelines, aiming to maintain the stability and 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 increasing the variety of financial products available.
REASONS FOR REGULATION Two Reason 1. Increase the information available to investors 2. To Ensure the soundness of the Financial System
ENSURING THE SOUNDNESS OF FINANCIAL INTERMEDIARIES • Asymmetric information can lead to the widespread collapse of financial intermediaries, • referred to as a financial panic. Because providers of funds to financial intermediaries • may not be able to assess whether the institutions holding their funds are • sound, if they have doubts about the overall health of financial intermediaries, they • may want to pull their funds out of both sound and unsound institutions. The possible • outcome is a financial panic that produces large losses for the public and causes • serious damage to the economy. To protect the public and the economy from financial • panics, the government has implemented six types of regulations
AIM OF REGULATION • 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.
STRUCTURE OF SUPERVISION • Acts empower organizations, government or non-government, to monitor activities and enforce actions. There are various setups and combinations in place for the financial regulatory structure around the globe
SUPERVISION OF STOCK EXCHANGES • 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
SUPERVISION OF LISTED COMPANIES • Financial regulators ensure 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
SUPERVISION OF INVESTMENT MANAGEMENT • Asset management supervision or investment acts ensures the frictionless operation of those vehicles. [
SUPERVISION OF BANKS AND FINANCIAL SERVICES PROVIDERS • Banking acts lay 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.
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