The Three Fundamental Principles of Bank Regulations

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As we all know, banking regulations can change depending upon the requirements of every country or state. However, there are certain principles of bank regulations that never ever change. In other words, these are the principles which are there in every country’s bank regulations.

Here are the three fundamental principles of bank regulations that are bound to last as long as bank regulations will do:

Meeting the Minimum Capital Ratio Requirements:

First and the foremost, every bank regulation in the world has the clause for the banks following it to maintain minimum capital ratios. These are requirements levied on banks so that they can promote their duty of being regulators. Each and every bank of a country must follow this principle in order to remain licensed.

Maintaining Market Discipline:

Another very crucial principle of bank regulations which must be conformed to by every bank of the country is that of maintaining market discipline. This principle compels the banks within a state to disclose the financial and other similar information yearly or monthly to the public. The reason this principle is a must is to make sure that the investors, depositors and the employees of a bank can assess the financial risks a bank may face.

Getting Licensed:

No bank in a country is allowed to function without obtaining a license by the regulators. The regulator is responsible for supervising all the licensed banks and monitor whether or not they are complying with the regulations. If any bank works against any requirement, the regulator is authorized to cancel its license.

Each and every bank must adhere to the principles of bank regulations within that country. The above given ones are just the three basic principles regulating worldwide today. However, this does not mean that bank regulations worldwide only have these three principles and none other.

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