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All You Need to Know about Financial Regulation

Financial regulation is very crucial for any economy of a country since it ensures that financial service providers operate in a safe and sound manner. Financial regulators’ main role is to ensure that financial services providers serve state and local credit markets. Before we go any deep, you need to know what the term financial regulation means for you to know its importance for a countries economy. Financial regulation refers to the supervision of financial institutions to certain rules and guidelines. It is important that financial institutions are supervised to the rules and regulations to ensure that they operate legally and in an honest manner. The supervision can be done by a government or a non government when it comes to financial regulation. That is the main reason hey a financial regulator does not have to be a government organization.

With financial regulations, there are several advantages that can be directed to the economy of a country. Increase in the variety of financial products that are available for customers is the first benefits that a country’s economy can benefit from as a result of financial regulation. Improvement in confidence in the financial is the second benefits that come along with financial regulation. People can lose confidence in the financial system without financial regulation hence the economy can be affected. Financial stability is another benefit that comes along with financial regulation.

The economy can prevail when there is financial stability in any country, and that is the reason being financially stable is crucial for any state. Consumers of the financial services can get the right protection against exploitation through supervision of financial institutions. It is evident, through the above mentioned reasons, that financial regulation is crucial for the economic wellbeing for any country. The regulator’s, whether government or non government, the main role in financial regulation is chartering, licensing and supervising state chartered banks. Other than supervising state chartered banks, the other function of financial regulators is chartering and licensing non bank financial service providers. When it comes to non bank financial service providers, the list includes mortgage lenders.

The main reason why financial regulators need to have quality skills is that financial regulation is a complicated matter. Effectiveness is one of the skills that a financial regulator needs to have for them to ensure proper financial regulation. Working with objectivity is necessary for a financial regulator to combine well with government initiatives that are focused in ensuring a smooth and robust economy. A financial regulator whether government or non government, needs to act proportionally. For a financial regulator to ensure that they do not lay weight on either the consumer or the financial institution that they are regulating, it is crucial that they act with the virtue of proportionality.

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