Financial Sector Reforms : A Summary

The banking industry has undergone major upheaval in recent years, largely due to the lingering recessionary environment and increased regulatory environment. Many banks have failed in the face of such tough environmental conditions. These conditions

The Indian economy following the 1991 crisis swiftly moved away from central planning economy towards market-based economy with the government having less intervention and control. As a result, companies were operating in what is called emerging

There are various categories of banking; these include retail banking, directly dealing with small businesses and persons. Commercial and Corporate banking which offers services to medium and large businesses (Koch & MacDonald 2010). Private banking, deals with individuals, offering them one on one service. The last category is investment banking. These help clients to raise capital and often invest in financial markets. Most global banking institutions provide all these services combined. With all these institutions in existence within the same localities and offering similar services, there is a need to regulate the industry so as to protect the consumer and provide fair working environment for all banks (Du & Girma, 2011).

Claessens, S. (2009). Competition in the Financial Sector: Overview of Competition Policies. Retrieved on 8/22/2013,

Differences in banking regulations across borders permit the most efficient channeling of funds from lenders to borrowers, leading to increased investment and thus increased GDP. Therefore it is imperative that policy makers prudently evaluate the possible consequences and benefits of harmonized banking regulations, as demonstrated by similar regulations instituted domestically, before any such endeavor is embarked upon.

b. With blemishes on the accounting profession the size of the Enron, Worldcom, and Freddie Mac scandals, among many others, who wouldn’t think that accountants were all ‘crooked’

b. Other indications of financial difficulties (default on loan or similar agreements, arrearages in dividends, denial of usual trade credit from suppliers, restructuring of debt, noncompliance with statutory capital requirements, the need to seek new sources or methods of financing, or the need to dispose of substantial assets).

One of the primary factors that can be attributed as to have led the recent financial crisis is the financial deregulation allowing financial institutions a lot of freedom in the way they operated. The manifestation of this was seen in the form of:

With this title two new government departments are created The Financial stability Oversight Council and the Office of Financial Research. The authority of the Board of Governors of the Federal Reserve System is it expanded also to allow them to supervise nonbank financial companies and certain bank holding companies that could affect the health of the country’s economy.

Food, transport cost, gasoline and home energy are some of the products that increased in cost due to the oil dilemma. Another cause is the reliance on credit as a means of financing one’s life. Many people have increasingly been addicted on credit cards and other credit facilities causing a strain of the financial capabilities of a person. The application of mortgages and loans increased sharply in the past decade and with many people not meeting their monthly payments, interest rates rose up and people were are less able to pay the periodical amounts required of them. The final cause that will be highlighted is the falling dollar value. This has the effect of reducing the purchasing value of many citizens. Many homeowners lost money in the form of inflation due to the increasing devaluation of the dollar. There are many other numerous reasons given for the crisis all of which worked together to escalate the problem all over the country and also to some countries elsewhere in the world.

The post-crisis regulatory framework has shifted from a framework which was centred on a single regulatory constraint – the risk-weighted capital ratio – to one with multiple constraints. In addition to the risk-weighted ratio, the post-crisis framework also includes a leverage ratio, large exposure limits and two liquidity standards (ie the Liquidity Coverage Ratio and the Net Stable Funding Ratio). And supervisory stress testing is playing an increasingly important role across a number of jurisdictions. Each regulatory measure has strengths and weakness. The multiple metrics framework is more robust to arbitrage and erosion

The banking industry is highly competitive. The financial services industry has beenaround for hundreds of years and just about everyone who needs banking servicesalready has them. Because of this, banks must attempt to lure clients away fromcompetitor banks. They do this by offering lower financing, preferred rates andinvestment services. The banking sector is in a race to see who can offer both the

According to the specialists, there are many reasons for this global financial crisis. We try to focus some prime reasons behind this

Financial regulation is necessary and without an efficient set of regulations a country could see rises in unemployment, interest rates, and the deterioration of financial intermediaries. With the globalization of the financial industry, it becomes more and more common for businesses to seek financing outside of their county 's boarders. These innovations in the financial industry stress why it is so important for regulations to be created and changed to reduce risk and asymmetric information in financial systems.

Private banking industry has changed in a very basic way, driven by many key factors such as: free competition systems, modern developments in information technology (in particular, developments of the internet), and changing demographics. Private banks now operate in an environment shaped by increasing and shifting regulations, and in markets influenced by the uncontrolled situations of the world economy and geopolitical issues.