The Role of De-Regulation of the Financial System - Essay Example

Deregulation refers to the system of moving away from the range of regulations of the activities related to finance. It helps the organizations to acquire their objective’s assistance, monetary policies, and financing in the public sector among others (Strahan, 2002). In various instances, the deregulation acts have been imposed focusing on the financial systems of industrial sectors in various countries. For example, one of the most crucial changes in the financial system’s regulations was the Gramm-Leach- Bliley Act, which was enacted in the US in the year 1999. Similarly, in Australia, the Financial Management and Accountability Act (FMA Act) was implemented in the year 1997 to ensure deregulation in the financial system of various industrial sectors.

These Acts, in turn, resulted in lessening the level of competition among the investment banks, traditional banks, and various insurance firms. Furthermore, this act allowed the companies to take part in each and every segment of the markets based on specific situations.

The deregulation in relation to the financial liberalization aspect has been comparatively a current experience in the context of globalization. The deregulation reforms have been applied in major countries all over the world through certain steps or procedures such as China, the United States, and Australia. It is in this context that deregulation i.e. lesser intervention of the government of a country has certain roles to play towards the financial systems in the economy as deregulation reforms tend to have string impacts over the financial sectors of every country fueling the scope of globalization (Clarke & Islam, 2004). It is worth mentioning that deregulation has certain advantages as well as certain disadvantages towards any economy and its financial system.

For instance, deregulation measures enacted in a financial system of an economy can motivate business entities to take part in the industrialization process more actively than compared to the period of the regulated financial system.