Type of paper: Essay

Topic: Finance, Law, Discipline, Banking, Regulation, Government, Business, Market

Pages: 2

Words: 550

Published: 2021/01/09

Regulation in Finance Industry

The regulatory authorities in the finance industry are mandated to oversee the implementation of the requirements that are set to govern the industry. The financial regulation relates to a form of supervision that subjects the financial institutions to some requirements, guidelines and restrictions whose aim is to maintain the soundness and integrity of the financial system. “The international financial crisis witnessed in 2007 and 2008 exposed major weaknesses in the coordination of the financial and macroeconomic policies”. There continue to be shortcomings in the management and regulation of financial risks in many countries. The financial regulation continues to influence the banking sector by reducing borrowing costs and while increasing the availability of a variety of financial products in the market. Such products include capital loans, securities, debentures and, loan able funds (Puzzanghera, 65).
The issues in the financial systems call for finding out measures to reform the international regulatory system in order to ensure that the financial industry would continue to operate efficiently in the changing economic world. Reforming the financial regulators would bring back market confidence and contribute to the protection and stability of the financial system. Apart from that, it would ensure some degree of protection to the customers as well as a reduction of finance related crime. There was a need for leaders to deliberate to restore the trust that people had in the financial system. The current complicated structure of governance makes it difficult for the financial reforms to take place. Currently, the financial system is made up of an ad-hoc monetary system that is not pro-active.
The current changes in technology, rising competition, and advancement in communication has brought about changes in the demand, supply and distribution of financial services in the market. There are inequalities witnessed in the relation to the accessibility, the high cost of capital and lack of honesty and transparency in the manner in which financial instruments are distributed. Callioni has observed that the financial market has become vibrant in responding to the ever-growing demand for financial services within the market, which has led to the emergence of several issues among the financial service providers. Regarding the way in which they handle the potential investors. The regulatory bodies are expected to change their tactics in order to keep pace with the changing environment in the financial market (120).
Some of the changes should include increasing customer protection. The regulatory authority should introduce rules that will ensure that transparent customers’ advice is provided. The rule should also ensure that investors are aware of the potential risks in the areas of investment they are seeking. There should be cooperation between the International Monetary Fund (IMF), the Group of twenty (G20) and, the Financial Stability Board (FSB), that would ensure the global financial system is better suited to withstand the sudden changes in the financial market. There should be an appropriate framework for governing the financial and macroeconomic policy. The framework should incorporate both the executive leaders, and the global financial institution.
The executive are expected to implement the main changes in the strategic policy while the international institution will provide constant policy advice to the members. The leaders making up the executive group should be selected through a systematic and acceptable process that is representative of the entire community. There should be regulations to ensure that firms are cushioned against inadequate capital and lack of liquidity in the event of unfavorable business outcomes. The law should restrict firms from taking excessive risks and developing excessive scales that would expose it to systemic risks. Apart from that, the law should implement early warning signs through the introduction of regulations to ensure accountability and transparency for agencies involved in credit rating. The regulation will protect investors from unfair discrimination through poor ratings by such agents.
The Law should introduce stringent rules on Transparency and accountability. It should remove loopholes in the current financial market framework that have given room for the proliferation of abusive practices that has been going on unnoticed. There should be the improvement of corporate governance in the financial institutions. Financial regulations should be put to ensure that shareholders have an opportunity to participate in the public affairs of the institutions in which they intend to invest. The shareholders should have a say in the executive compensation affairs in order to ensure that the structuring of the compensations does not lead to the emergence of principal-agent conflicts. The law should enhance the regulations that will strengthen oversight and provide empowerment to regulators to enable them investigate fraud, conflict of interest and system manipulation to benefit the interests of a few individuals.
The regulatory authority needs to change the process of supervision of listed companies. Stringent measures should be put to ensure that companies trading in the stock market are compliant with the regulations under the Trading Acts. The Acts requires that listed companies should publish audited financial reports and meet all other disclosure requirements. This provision continues to be overlooked where some blue chip companies can win their way because of having connections with key personnel within the regulatory bodies. The proliferation of irregularities has exposed the investors to risks of investing in companies whose profitability is questionable because of self-centeredness by some individuals. “The irony is that; the same regulatory authority that is supposed to safeguard the interests of the shareholders is the same that is compromising their wellbeing” (United States, Government Accountability Office 77).
In the area of banking, the financial regulatory system is designed to ensure that banking institutions are observing the rules in an operation as laid down in the Banking Acts. Recent trends in the banking sector have indicated that there are banks that fail to meet these requirements. This is especially regarding the investment of shareholders funds in no- economic ventures like funding political campaigns without the knowledge of the shareholders. There are other malpractices in the area of lending where some banks expose their members to financial risks when they expose their financial position and investment portfolios to competitors and fraudsters. Davies has observed that the regulatory bodies should put more strict measures to ensure the safety and security of the shareholders assets and valuables left in the custody of the banks. Additionally, the regulatory authorities should tighten the regulation of bank insurance and increase the threshold of Insurable risks. The regulation will cater for the rising advancement in technology, which has led to sophisticated criminal operations such as cyber crime, which is exposing the banks to great risks (48)
In conclusion, the financial industry remains an important part of the as it continues to serve as the link between demand and supply of financial services in any given territory. The process of intermediation between money borrows and lenders must be regulated in order that the interests of the lenders and investors are safeguarded at all times. The financial regulatory authorities should constantly evaluate their regulations in order to address the ever- changing trends in the financial market. They should ensure that the shareholders have access to timely and truthful information at all times that will enable them to make informed decisions.


Callioni, P. Compliance and Regulation in the International Financial Services Industry: Turning Compliance into a Competitive Advantage. Boston: Global Professional Pub, 2008.Print.
Davies, H. & Green, D. Global Financial Regulation: The Essential Guide, New York: John Wiley & Sons, 2013. Print.
Puzzanghera, J. Obama to propose strict new regulation of financial industry. 2009. http://articles.latimes.com/2009/jun/16/business/fi-financial-regs16. Accessed April 1, 2015
United States, Government Accountability Office. Financial regulation industry changes prompt need to reconsider U.S. regulatory structure: report to the Chairman, Committee on Banking, Housing, and Urban Affairs, U.S. Senate: DIANE Publishing, (2004). Print.

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WePapers. (2021, January, 09) Good Example Of Essay On Finance:. Retrieved June 27, 2022, from https://www.wepapers.com/samples/good-example-of-essay-on-finance-2/
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Good Example Of Essay On Finance:. Free Essay Examples - WePapers.com. https://www.wepapers.com/samples/good-example-of-essay-on-finance-2/. Published Jan 09, 2021. Accessed June 27, 2022.

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