Regulation of Commercial Banking Case Study Example | Topics and Well Written Essays - 2000 words

Regulation of Commercial Banking - Case Study Example The purpose of such banking regulations, the justification for having such regulations and the extent to which these regulations are implemented in banking customs across the world are studied in some detail. Bank regulations comprise of government regulations that sets out certain requirements and rules, restrictions and guidelines, that banks, of different countries are supposed to follow to maintain the integrity of the financial system. Bank Regulations in the US is not as closely knit as in other countries and the regulators could be Federal Reserve Board, or other state regulatory bodies. The banking regulations across the world are focused not just on safety and security but also on privacy of customers, disclosure issues, anti money laundering issues, anti terrorism issues, promotion of lending to lower income groups, and fraud prevention. Different cities tend to have their own financial regulation laws and these laws are in place to allow governments and banks to work closely in matters related to national security and financial needs. The Bank Secrecy Act or BSA requires financial institutions to assist government agencies to detect money laundering practices. Financial institutions tend to keep records of cash purchases and file reports of transactions above a certain amount. These institutions are required to report suspicious activities of money laundering, fraud, privacy intrusion and tax evasion as well as other criminal activities to the government and appropriate authorities. Financial institutions are also required to invest in communities and a file must be maintained on the support provided to communities. Financial institutions are required to disclose data about home purchases, home finance, home purchase and pre-approvals, home improvement, and refinance applications as well as multifamily dwellings in accordance with the Home Mortgage Disclosure act. Apart from this and the Community Reinvestment Act, there are Reserve Requirements for certain Institutions. The reserve requirements indicate the minimum reserve that banks must have so that this money as deposits could come to some use during severe recession. Barrios and Blanco (2003) analyses the extent to which banking firms set their rates of capital equity over assets and have developed two theoretical models that tend to demonstrate capital ratio for firms which are affected and not affected by capital regulation. Freixas and Santomero (2002) use the regulatory theory to analyze the theory of banking regulation and consider the justifications of financial intermediation to identify market failures that would make certain banking regulations necessary. The analysis of regulation tends to compare within the domains of banking and industrial organization and shows why banking regulations act as a safety net for banks and why and how it should be structured in a way that could make banking systems more efficient. In a study by Hendrickson and Nichols (2001) annual bank insured data were utilized from 1936 through 1989 to evaluate bank regulations and bank risks with cross country comparisons. A bank tends to operate in a

Report Research Paper Example | Topics and Well Written Essays - 1500 words

Report - Research Paper Example .. 7 3. Summary†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 9 4. References†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 10 APPENDIX The Brazilian Economy 1. Executive Summary Brazil has maintained considerable economic difficulties from 1900 to 2012 due to ineffective financial policy construction, government reforms, and an over-reliance on commodities to drive economic sustainability and growth. Historically, coffee and oil have been staple export products; however, these commodities are subject to unpredictable spikes or decline in prices. At the same time, the CPI in Brazil is affected by higher-than-average inflation due to rising supply chain prices and interest rate fluctuatio ns that limit consumer spending and investment. It is recommended that Brazil diversify its economy and return to the crawling peg monetary policy now that industrialization and consumerism are beginning to develop effectively in this country. 2. Background on Brazil and its Economy Brazil is currently experiencing significant economic growth due to changes governmental and economic reforms as well as its current position as a major contributor to the global trade system. The country, once overly reliant on coffee production and rail system transportation to promote economic growth and job security, now maintains a growing industrial base in consumer products, industrial products and commodity development that contributes to a high GDP comparatively to other countries around the globe. Sixty seven percent of total GDP is attributed to the service sector, as it relates to health care, hospitality, beauty provision and restaurant (to name only a few). The rest of gross domestic produc t is allocated in agricultural development and industrial-based employment. Unfortunately, Brazil currently has a debt to GDP ratio of approximately 50 percent, which is much higher than that of other emerging or developing nations (Blanchard, 2005). At the same time, the inflation rate in Brazil is approximately four percent annually which impacts disposable income for consumers and also cash flow availability for companies in the industrial and agricultural sectors. High prices throughout the commodity supply chain, as one example, are offset by rising prices on corn, coffee and other commodity products used in the household sector. High inflation occurring annually since 2003, when the country experienced over 17 percent hyperinflation, continues to erode the government’s ability to stimulate more economic and job growth. The provision of public services, such as electric, telephone services, and water consumption experienced inflation rates of 8.38 percent with supplement ary tariff increases of over 15 percent on all of these services (Business News Americas, 2004). Brazil has not, even during years where inflation was reduced through economic policy and infrastructure development, experienced any significant decreases from these cost levels. As such, consumerism is reduced due to lowered disposable income for consumer products. From 1990 to 1997, Brazil experienced inflation to the level where gross national product was consumed up to 40 percent due to rising prices (Selva, 2010). Further, credit card companies, in response to decreased consumer savings in banking institutions, began charging upwards of 25 percent for consumer and industrial purchases (Selva, 2010). The lack