Banking regulation and supervision: Difference between revisions

{{Basel II}}

{{Banking |terms}}

 

Given the interconnectedness of the banking industry and the reliance that the national (and global) [[economy]] hold on banks, it is important for regulatory agencies to maintain control over the standardized practices of these institutions. Another relevant example for the interconnectedness is that the law of financial industries or financial law focuses on the financial (banking), capital, and insurance markets.<ref>{{Cite journal|last=Vértesy|first=László|date=2007|title=The Place and Theory of Banking Law - Or Arising of a New Branch of Law: Law of Financial Industries|url=https://papers.ssrn.com/abstract=3198092|journal=Collega|language=en|location=|volume=Vol 2-3. XI|pages=|via=}}</ref> Supporters of such regulation often base their arguments on the "[[too big to fail]]" notion. This holds that many financial institutions (particularly [[investment banking|investment banks]] with a [[commercial bank|commercial]] arm) hold too much control over the economy to fail without enormous consequences. This is the premise for government [[bailout]]s, in which government financial assistance is provided to banks or other financial institutions who appear to be on the brink of collapse. The belief is that without this aid, the crippled banks would not only become bankrupt, but would create rippling effects throughout the economy leading to [[Systemic banking crisis#Systemic banking crises|systemic failure]]. Compliance with bank regulations is verified by personnel known as [[bank examiner]]s.