Financial regulation ensures that financial service providers operate in a safe and sound manner and that is the reason why it is important for any economy of a county. Financial regulators’ main role is to ensure that financial services providers serve state and local credit markets. You need to know what the term financial regulation means before we go any deep for you to know its importance for a countries’ economy. The supervision of financial institutions to certain rules and guidelines is referred to as financial regulation. It is important that financial institutions are supervised to the rules and regulations to ensure that they operate legally and in an honest manner. A financial regulator can be either a government or a non government organization. For that reason, a financial regulator does not have to be a government institution.
As a result of financial regulation, there are several different benefits that the economies of a county can enjoy. As a result of financial regulation, the first benefits that a country’s economy can benefit from is increase in the variety of financial products that are available for consumers. With financial regulation, the second benefit that comes along is improvement in confidence towards the financial system. Without financial regulation, people can lose confidence in the financial system hence the economy of the country can be affected. Another benefit that comes with financial regulation is financial stability.
For any country, achieving financial stability is crucial since it ensures a robust economy. 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. Chartering, licensing and supervising state chartered banks is the main role of regulators, whether government or non government, in financial regulation. Other functions of financial regulators, other than supervising state chartered banks is chartering and licensing non bank financial service providers. When it comes to non bank financial service providers, the list includes mortgage lenders.
Financial regulators need to have quality skills since financial regulation is a complicated matter. One of the skills that a financial regulator needs to have for them to ensure proper financial regulation is effectiveness. A financial regulator needs to work with objectivity in order to combine well with government initiatives that are focused in ensuring a smooth and robust economy. Another quality that a financial regulator, whether government or non government, needs to have is proportionality. 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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