The Major Requirements of Bank Regulations

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Bank regulations are more or less banking laws set forth by the governing authority of a country. They include a variety of factors and can change over time depending on economic conditions. Each country has a different set of bank regulations; however, there are certain aspects which remain unchanged throughout. These are actually the requirements which are set forth for the banks to comply with if they want to remain running.

Here are some of the most common requirements found in nearly every bank regulation around the globe:

Requirements for the Reserve:

Each bank must comply with the reserve requirements set by bank regulations. These requirements have a specific amount of reserve which banks should have in order to demand deposits and banknotes. The reserve requirements are usually combined with capital requirements; yet, they are important to consider by the banks.

Capital Requirements:

The capital requirements clause in the bank regulation sets a structure for the banks to handle their capital in relation to their assets. These requirements are the basics of every bank regulation, and every bank must adhere to them.

Financial Reports/Disclosure Requirements:

Every bank is required to prepare and submit yearly financial statements according to the standard mentioned in the bank regulation. The bank is also supposed to get these reports audited and published for its clients to see. Also, before being published, these reports need to be attested by the authorities of the bank.

Requirements regarding Credit Rating:

The bank regulation of every country sets forth a minimum credit rating for banks to comply with. Banks need to obtain credit ratings from reputable and licensed credit rating agencies and disclose it to investors and potential investors.

Exposure Restrictions:

The exposure a bank is making regarding its assets should be limited to a certain extent as defined in the bank regulations.

Further reading: Corporate Governance | Audit | Performance Improvement

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