The Importance Of The Financial Service Sector

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).

All in all, I aim to assist in creating an illuminating understanding on American financial system and reforms through this public policy paper.

Government departments are instrumental to a flourishing and secure economy. They are in place to serve their constituents and ought to keep that in mind. The Federal Deposit Insurance Corporation (FDIC) fits this well and is in place to ensure that bank users are protected in instances of economic downturn and that their money is insured. In this way, regulation is extremely necessary to ensure a stable economy in instances of financial instability. To completely understand the FDIC, it is important to understand why and how it was created, its history, major responsibilities and who the leaders are.

Andrew Bailey (2013) “The future of UK banking - challenges ahead for promoting a stable sector”. Bank of England [online]. Available from:

The reality of systemic risk made the task of regulating the financial system increasingly complicated, as the crises aren’t contained in one country or market. The extreme inter-dependence between the different agents is the main reason why we need regulation today, as some misconducts can cause a domino effect, affecting markets globally. The structure of the banking system in itself explains this process. In the finance industry, banks borrow money from other banks. If one bank fails, the one who lent the funds in the first place might also follow the same path, creating panic in the markets. The government’s first prerogative is to protect its citizens from these

The reasons why the regulatory framework is exists is to describe the Financial Services Commission of Ontario (FSCO), how the FSCO fulfills its mandate by achieving regulatory outcomes, FSCO’s core regulatory activities and the principles that FSCO follows when conducting regulatory activities. In the financial services that FSCO regulates, expectations are one of the things that play a very important role. All the customers expected to be treated nicely, fairly and their money from the future pension must be secured. They expect more financial products and more services that should meet the public’s needs from FSCO. The regulatory framework will do its job by summarize the expectations of FSCO from businesses or some individuals that work

Financial regulation is highly significant to a nation in order to maintain the integrity of a financial system by creating guidelines for banks, brokers and investment companies. The financial regulatory authorities within Australia include: The Reserve Bank of Australia (RBA), Australian Securities and Investments Commission (ASIC), Australian Prudential Regulation Authority (APRA), the Australian Treasury and the Council of Financial Regulators (CFR). These institutions play an important role in Australia’s economy, responsible for consumer protection and the regulation of investment banks and finance companies.

As part of the Financial Services and Markets Act 2000, the FSAs sole purpose are to meet their four objectives: maintain market confidence, enhance financial stability, protect the consumer and reduce financial crime. By not implementing rules, doing enough investigations and enforcing power, the FSA has failed to meet all these objectives. Trust was lost in the UK Financial system when the LIBOR scandal went public, banks revealed themselves to not be as financially stable as what they portrayed to be, a number of consumers got scalped by the manipulation and the LIBOR scandal occurred as one of the biggest financial crime that has yet to send individuals to jail. As a regulator that failed to meet all of its objectives, the FSA had a responsibility in the LIBOR scandal. Being the UK’s central bank, the BoE’s mandates were to provide monetary stability and financial stability. Even if this body does not oversee banks’ compliance with regulations, the scandal led to monetary and financial instability, which should concern the BoE. In fact, Diamond testifies against Paul Tucker, the deputy governor in charge of financial stability for the BoE. Diamond claims Tucker implied the LIBOR rate is high and should be lowered.

On 4th February 2013 the Financial Services (Banking Reform) Bill (the Bill) was introduced to Parliament. This Bill has sought to implement the ring-fencing proposals of the UK Independent Commission of Banking (ICB), which is also known as the Vickers report. The Bill also represents the UK’s response to wider international calls to structurally reform banks, such as the Liikanen reports’ proposals on reforming the structure of the EU banking sector .

Mandated services: services which have a high economic cost if not performed at any point in time and where the customer does not have an alternate provider. The economic cost for interruptions in these services are high because customers need these to function in an economy by having liquid assets (most likely cash) for day to day needs. Such services are provided by the Government when the private market fails and so are held in high regard. Isolation of mandatory services is used to provide authorities confidence in the retail banking system over the protection of creditors funds. “By ring fencing retail banking activities, the UK authorities will be able to protect the payments system without having to insure the high-risk products” (Banking, finance, and the role of the state, n.d.).

During the last financial crisis, weaknesses were exposed within the UK’s system. The tripartite regulatory framework,

1. Review the decision in the case of Shah v. HSBC (2012) and evaluate the implications of the decision for regulated financial services firms. In particular:

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

List of abbreviations List of tables Acknowledgements Abstract 1. 2. 3. 4. 5. 6. 7. 8. Introduction Problem statement Objectives and hypothesis of the study Literature review Structure and performance of the financial sector in

Further the Primary objective of creating new single operator was to unify the market administration activities as the security commission faced many criticisms and faltered on the main function of regulating the market in order to give stability to the financial sector and thus resulted in ceasing of security commission. In 2011, when the financial markets authority act 2011 (FMC ACT) has been sanctioned and came into action on 1 may 2011, certain changes were made and one of the most important changes by this enactment is the introduction of new reinforced regulatory body. The FMA was designated under the crown entity act 2004, with supreme powers to monitor and control the financial markets by revoking the authorities of