After much research conducted on an international and national level, economists have come to the conclusion that banking can do more good than bad. Human welfare is dependent on banking and most inherently; it matters when human beings fail to rise up to the economic challenges of the world. With the current recession, banks everywhere have raised their fiscal costs to curb the existing banking crises.
According to research, banks are also responsible for maintain the level of economic growth within an environment. These banks efficiently help collect savings allocating them in projects that have the highest possibility of maximum social proceeds. This capital is used to apply effectual authority over financed firms that promote advancement and development.
The same research work has also shown that bank regulations can help equally distribute income among people of the society eradicating poverty for good. These regulations can also make sure that the distribution of credit takes place among projects that have a promising future instead of those owned by families and corrupt politicians. This would result in an equal distribution of profits where the deserving can receive their fair share of money.
By adhering to best practices, banking regulations can provide human beings with the ideal society where there is no corruption and the concept of poor vs. rich does not exist. This research has lead economic policy developers to believe in the existence of an important relationship that binds banks and financial welfare together.
For example, internationally recognized financial institutions like the IMF (International Monetary Fund) and the World Bank have created checklists for best practices that pressure all countries to implement these recommendations.
When it comes to banking regulations, the Basel Committee has been assigned the task of supervising the implementation of the Basel Capital Accord that was drafted in 1988. The accord is based on three pillars. According to the first pillar, wide-ranging procedures should be developed to trim down the contribution of bank assets.
The second pillar of the Basel Accord states that individually governing agencies should be created. These agencies will help regulate the process of supervision making banks more liable to following the rules established in the accord. This will also reduce the risk of misusage financial power by reigning businesses in the market.
And finally, the third pillar focuses on the need of discipline within markets and banks. According to this pillar, banks and businesses are supposed to provide clear and correct information about their financial transactions. All transactions made should be recorded and made available to the supervising agencies on demand.