Line from US TV Series The West Wing - Essay Example

1. Banking as a sector is relatively sensitive because one of the primary responsibilities of it is to work as a custodian of deposits of individualsalso.2. As such banks should work in such a manner where they must be subject to certain restrictions and regulations which effectively govern their behavior and actions.3. Banks are considered as inherently unstable and fragile therefore some form of regulation is considered as necessary to ensure that they remain stable and work under parameters which can guide them to act in certain responsible behavior.

(Benston, and Kaufman, 1996)4. This fragility of the banks is mainly due to maintenance of low cash to reserve and capital ratios. These low ratios therefore result into excessive risks for the banks therefore regulations are considered as necessary.5. It is however, important to understand that too many regulations may affect the profitability as well as efficiency of the banks. The cost of compliance with the regulations may be high and inadvertently, shareholders of the banks may suffer. As a banker, I therefore am of the opinion that regulations should be limited.

( Benston, 2000)6. Regulators need to make sure that they impose only such regulations which are absolutely necessary for the survival of banks. Creating extra regulations can only increase cost for the banks.7. Further, regulators should also develop their own capabilities and skills to properly implement these regulations. Post implementation audits of such regulations should therefore be aimed at improving the compliance of banks with such regulations to increase the overall trust of people in banking system.

References Benston, G. and Kaufman, G. (1996) The Appropriate Role of Bank Regulation. The Economic Journal, 106 (436), p.688-697.Benston, G. (2000) Is Government Regulation of Banks Necessary?. JOURNAL OF FINANCIAL SERVICES RESEARCH, 18 (2-3), p.185-202.