For any economy of a country, financial regulation is very crucial since it ensures that financial service providers operate in a safe and sound manner. Financial regulators’ main role is to ensure that financial services providers serve state and local credit markets. You need to know what the term financial regulation means before we go any deep for you to know its importance for a countries’ economy. Financial regulation refers to the supervision of financial institutions to certain rules and guidelines. To ensure that financial institutions operate legally, and in an honest manner, it is important that they are supervised. The supervision can be done by a government or a non government when it comes to financial regulation. That is the main reason hey a financial regulator does not have to be a government organization.
As a result of financial regulation, there are several different benefits that the economies of a county can enjoy. The first benefit that a country’s economy can benefit from as a result of financial regulation is the increase in the variety of financial products that are available for customers. The second benefit that comes along with financial regulation is the improvement in confidence in the financial system. People can lose confidence in the financial system without financial regulation hence the economy can be affected. With financial regulation, financial stability is another benefit that you can get.
The economy can prevail when there is financial stability in any country, and that is the reason being financially stable is crucial for any state. When financial institutions are supervised well, consumers can get the right protection against exploitation. For the economic wellbeing of any country, financial regulation is crucial, and that is evident due to the above mentioned reasons. Chartering, licensing and supervising state chartered banks is the main role of regulators, whether government or non government, in financial regulation. Other than supervising state chartered banks, the other function of financial regulators is chartering and licensing non bank financial service providers. The list of non bank financial service providers includes mortgage lenders.
Financial regulators need to have quality skills since financial regulation is a complicated matter. Effectiveness is one of the skills that a financial regulator needs to have for them to ensure proper financial regulation. In order to combine well with government initiatives that are focused in ensuring a smooth and robust economy, a financial regulator needs to work with objectivity. Propotionality is the other quality that a financial regulator needs to have, whether government or non government. Being proportional is crucial for any financial regulatory body since it ensures that they do not lay a weight on either the consumer or the financial institutions that they are supervising.