Bank regulation Essay Example | Topics and Well Written Essays - 3000 words

Bank regulation - Essay Example Additionally, there was a lack of appreciation of the magnitude and complexity of the workings relating to large financial institutions and trading banks with respect to those financial institutions that had more than one jurisdictions coupled with the difficult associated in dealing with the problem (Kawai 2013). There was also insufficient oversight of the derivative markets and a lack of clear visibility towards the magnitude of the linkages between the shadow and regulated banking sectors and the financial institutions. Banks are tasked with regulating money supply via the directive of the central bank. Some of the roles of banks include crating money, being the principle allocator of credit funds available to the public, they act as the managers of a country’s payment system and they are the depositories of the public in matters relating their financial savings (Connor 2005). The bank’s regulatory role is divided into three functions which include controlling the supply of money in the economy, meliorating matters regarding equity and efficiency of intermediation of finances and preventing systematic risk. The measures undertaken to regulate banks are because banks need to be streamlined in order to prevent them from using short term strategies to increase their returns and also to prevent firms from adopting bad behaviors that are against the moral code of conduct (Kolb 2011). The regulations also aid customers to develop a degree of confidence and comfort which can only be facilita ted by the institution of the regulatory measures. Three have been a wide variety of measures instituted globally in order to address regulatory reform to deal with the shortcomings highlighted by the effects of the global financial crisis. The main aim of the reform platform has been to find an optimum point where productive risks that are responsible for