The Primary Objectives of Bank Regulations

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The primary purpose of bank regulations is to serve as a government law for commercial and private banks and financial institutions. Banks and financial institutions regulating within a country are required to fulfill the requirements of the bank regulations of that particular country.

The Aims Achieved Through Implementing Banking Regulations

Bank regulations are made for one country or state, and can be changed according to the financial environment of a country. This means that the bank regulations of any country can be changed to encourage growth and further promote the financial condition of the country.

Here are some of the common objectives of bank regulations that are followed in mostly every country of the world:

To Protect Depositors:

The first objective of bank regulations is to safeguard depositors from any risks they might face while investing in a bank. In other words, bank regulations protect depositors while they are using a commercial bank.

To Avoid the Misuse:

It is perhaps the most vital objective of bank regulations to avoid misusing the banks within a country. Adverse financial conditions can happen and banks can go astray. Therefore, to avoid such situations, bank regulations are created. Whether it is a private bank, public bank or a commercial bank, all banks need to adhere to these regulations.

To Safeguard the Banking Privacy:

The third most important objective of bank regulations is to safeguard banking confidentiality. No bank is allowed to offer interest rates or profits on investment more than what the bank regulations have determined. This way, all the banks of a country work in harmony with each other and easily help in promoting the overall growth of the financial environment in a country.

Allocation of Credit:

The final objective of bank regulations is to monitor the growth of credit and direct it where needed.

Further reading: Corporate Governance | Audit | Performance Improvement

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