Financial Innovation : An Concept Grounded

The statement on “More regulation is better than less” reflects the impact a financial institution experiences under certain circumstances. Firstly, we look at both pros and cons on why financial regulations were implemented.

The requirement of central clearing promotes transparency, and “skin in the game” rule encourages banks to take less speculation, and a more standardized and transparent market will be formed in US. As a result, with better regulated financial system and more sophisticated investment protection, America magnetizes more international capital flows, which boost the development of US financial institutions. In the meanwhile, other countries tend to follow the US regulation standard, improving market discipline of global financial institutions. However, magnates in financial industry with unchanged risk-taking tendency can manipulate their leverage ratio, and the credibility of information they state can be

Regulation is the process of making rules and legislations, thus creating a sort of supervisory system to be carried out by all firms and individuals. Managers are trusted by customers of financial service firms with their monetary resources, as in most cases clients do not fully understand how their money is being circulated once handed over. Although it can cost billions to pay for regulators to carry out their jobs, firms still pay for these services as it may bring more benefits in the long run as compared to drawbacks. (Arnold, 2012) Every firm or organisation needs regulation to ensure that minimum standards are being observed, to protect the customers and the money they decide to invest in a company. In a broader sense, it is possible for the occurrence of a financial crisis to be associated with financial regulation, or its lack thereof. In this essay, I will be writing regarding the global financial crisis of 2008 that began in the United States (US) and proceeded to affect the rest of the world following its collapse.

The banking sector, in which the company operates, is characterized by conflicting regulations. For instance, the market has traditionally been intensely regulated, but the past recent decades have witnessed an increase in deregulation. This effort of deregulation was relevant in the context of globalization and market liberalization, and it led to the intensification of competition. In such a setting, banking institutions, among which also Barclay's, devised and implemented various strategies to boost their profits. Some

Many regulators, politicians, and business people "poo poo" the threat, financial innovation poses to the industry. But the reaction was really indifferent. While by using derivatives, bankers started gambling on virtually anything.

“Some economists believe that every point gained in financialization leads to deeper inequality, slower growth and higher unemployment,” Mike Collins.

At the same time, learning curve advantages are relatively unimportant, since innovation is not the most important profit driver in banking. Also, banking does not rely heavily on proprietary technology. Researchers argue that economies of scale are of little importance in financial services industry. However, specialist knowledge might deter new entrants, as major banks know markets and customers much better than new players. There is also scarcity of important resources such as qualified expert staff. Conclusion: medium threat of new entrants

A variety of new trends and innovations have expand in banking industry. Some are positive and negative, but some show a mix of plus and minus. Government has been really concern and increasingly keeping eyes on these case, especially after 2008 financial crisis.

In the first section, we will look at the overview of the banking industry such as the strategic position, its structure, and information on major competitors. We will also look at the strategic developments at the industry level as well as overall competitive challenges. We analyzed the trends that impact on the business growth, innovation and risk management. We also examined the implications of some developments for business, regulatory

The aim of this study is to investigate if the use of strategic Risk Management procedures can assist to minimise the impact of FinTech in financial services practices? Technology is ever changing and adapting, we have sped past Moore’s Law which stated “That the number of transistors in a dense integrated circuit doubles approximately every two years” that technology is be ever evolving (Brock and Moore, 2006). No more so than in the world of finance and wealth management. No other area than this new paradigm has attracted more discussion, printed words, or conference speeches than FinTech and Robo-advice. This is now the panacea to the technologically and digital shrewd generation. This will spawn a new age in the provision of investment advice on a huge scale to the emerging tech savvy generation.

Financial innovation is constantly reshaping the world. However, the subprime crisis since 2008 has drawn great attention all over the world, highlighting the limitations and hazards of financial innovation. The financial turmoil began in the United States, at which time, the subprime mortgage lenders were going bankrupt, investment funds were forced to close and the value of the stock declined significantly. According to Sánchez, the Deputy Governor of Mexican Central Bank, the subprime crisis since 2008 was mainly caused by the phenomenon that the innovation of many complex financial instruments were extensively used without appropriate regulation (Sánchez, 2010). As financial innovation involves a large number of products and cannot analyze all of them, this essay will only focus on MBS, which has been one of the most important and widely-used financial innovation since the 1960s. By the end of 2006, the total amount of MBS was $6.4 trillion, 49% larger than the market for Treasury debt (Fabozzi, Bhattacharya and Berliner, 2010).

Securitisation will be discussed later on. New Technology New technology has reduced barriers to entry. Originally the banking sector was based on branch networks; in order to operate overseas, a bank required a branch in that country. Now, thanks to new technology, in particular the internet, the physical presence of a bank is not as important and branches are no longer a requirement to operating overseas as physical proximity does not determine where money can be raised. For example electronic trading technology has allowed the creation of companies such as E*Trade and is providing new distribution channels and shifting the balance of power to the consumer. Thus technology has changed the way in which money is lent and banks have had to become more innovative both in the way in which their financial services are delivered and the services they offer. Direct banking (telephone and internet banking) is becoming comparatively more important and the branch network, which used to be a major competitive advantage because it created a barrier to entry is now becoming one of banks’ most expensive problems (Llewellyn 2

When looking at something as large as the economy, we have to realize that there is always the potential for something to go wrong. This could be something that naturally takes place due to lows and highs in business cycles, or something that is totally unnatural, like human manipulation of the market. Due to things like this we often have to set some type of regulations to keep certain factors of the economy in check. During this paper I will discuss some of the regulation packages that have been introduced in an effort to keep the economy in check. A few of these include the Glass-Steagall Act, the Frank-Dodd Act, and the Volker Rule. Furthermore, we will attempt to answer questions like, how does the Frank-Dodd address the “Too Big to Fail” problem with banks? Do you think the Frank-Dodd Act accomplishes its goal? If not, what might you suggest to correct the issue?

Today it’s difficult to envision a world without Finance. As it were, Finance is the soul of our investment exercises. To perform any financial action, we require certain assets, which are to be pooled as far as money (i.e. as currency notes, different assets, and so on.). Finance is necessary for attaining possession of physical assets, which are required to perform activities which are productive and convey business operations, for example, sales, pay recompenses, contingency reserves (liabilities whose occurrence is uncertain) etc.

The Modern Phase: It has begun in the mid 1950’s. It has shown commendable development with combination of ideas from economic and statistics that led the financial management more analytical and quantitative. The main issue of this phase is rational matching of funds to their uses, which leads to the maximization of shareholders’ wealth. This phase witnessed the significant developments. The areas of advancements are: capital structure.