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A Critical Review of Financial Regulation-Supervision in the Central Bank: A Comparison between the United States and the UK - Essay Example

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Regulation of financial institutions, both foreign and domestic, is the proverbial glue that holds the global financial market together. These are the laws that govern how financial institutions can and do operate and what laws they must abide by within these dealings…
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A Critical Review of Financial Regulation-Supervision in the Central Bank: A Comparison between the United States and the UK
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Download file to see previous pages Enacted by the World Trade Organization (WTO) during the Uruguay Round negotiations, GATS determines whether and to what extent global economies are coming together into a single pattern. Despite such treatises, there are significant differences between the regulatory standards in banking between the United States and the United Kingdom, and this will be the focus of this paper.
Although finance has become one of the most globally integrated sectors in the world, financial mobility and competition causes international differences that are systematic and resilient. However, the similarities between the organizational structure of the British and American financial regulatory systems have significantly diverged since the UK consolidated its financial regulatory agencies within the unified body of the Financial Services Authority (FSA) and the financial system of the United States has remained decentralized and fragmented with a consortium of governing agencies. Comparatively, the U.S has a more ambitious regulatory agenda that encourages a more elaborate system of financial oversight that is inherently more difficult to consolidate. Contrarily, the goals of the financial regulators in the UK are more unpretentious and cost effectiveness is one of the country’s regulatory objectives in the field of financial regulation policy, which tends to promote a less awkward system of financial guidelines that more adequately accommodates consolidation of regulatory functions....
though British fiscal regulation is less rigorous than financial policies in the United States, both policies have a profound effect on the greater structure of global finance. The recent global financial crisis has put tremendous strain on both the financial markets of the U.S. and the UK, which has put both fiduciary structures under close scrutiny. The U.S. banking system and the UK financial system are nationally regulated by two separate governing bodies. The banking system of the U.S. is predominantly regulated under the Federal Reserve Act (FRA) (Federal Reserve Board (FRB), 2010) and the FDIC (Federal Deposit Insurance Corporation) (FDIC, 2009), while the UK financial system has recently been consolidated under the FSA (FSA, 2011). However, the overall motivation of prudential regulation remains the same internationally, despite the differentiations between the governing entities. The overall purpose of the regulatory bodies is to protect the banking system from financial crises by monitoring individual transactions to ensure that adequate collateral was presented and creating and enforcing regulations concerning self-dealing, capital requirements, and entry restrictions (Hellmann, Murdock, and Stiglitz, 2000). Additional optional restrictions could be placed on real estate lending and interest rates and the implementation of deposit insurance has been added for improved financial security (Hellmann, Murdock, and Stiglitz, 2000). Concerns also led many countries to establish central banks to serve as last resort lenders (Hellmann, Murdock, and Stiglitz, 2000), primarily for other banks. Literature Review organization of u. s. banks The Federal Reserve is the central bank of the United States and responsible for regulating the U.S. monetary system, determining ...Download file to see next pages Read More
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