Financial Regulations – The Basics Explained


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Financial regulations are a set of policies, regulations and laws meant for financial institutions to adhere to. They provide certain restrictions, guidelines, requirements and policies with the objective of maintaining financial integrity within a state. Financial regulations are usually handled by the government or the State Bank of the country. However, at times even non-government organizations are authorized to make other financial institutions comply with the financial regulations.

Objectives of Financial Regulations

The main objectives of financial regulations are the following:

Enforcing Laws:

There are numerous laws related to the financial institutes within a country. Each and every financial institute that is established, whether it is a public one, private one or that which is related to the government, must abide by these laws. If any institution fails to do so, financial regulators are there to enforce the law and even report to higher authorities in severe cases.

Prosecuting Misconduct Cases:

There are several occasions in which an institution is found guilty of breaching the law. In such cases, financial regulators have the right to file cases against them and prosecute them.

Licensing Providers:

Financial regulators are responsible for licensing the different financial institutions that are being established within the state. By providing the license, the regulators make sure that the institution is completely abiding by the laws set.

Protecting the Clientele by Performing Investigations:

At times, complaints against a particular financial institute can pile up if its customers do not believe that it follows financial regulations. In such cases, the regulators are bound to carry out an investigation against it and notify the institution of their misconduct. In most cases, a penalty is placed. If paid, the institution can avoid the hassle and scandal of being taken to the court.

To Maintain Stability in the Financial System:

By making all institutions follow the same guidelines and instructions, the financial system of the state or country becomes more stable, and any economic downfalls can be countered easily.

In this section we will discuss:

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