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Why does the financial industry need to be regulated?
Finance & Accounting
Pages 17 (4267 words)
Financial industry defined by a set of markets, instruments and financial intermediaries whose goal is to ensure the mobilization and efficient allocation of available savings to finance private and public needs while protecting capital investments under risk conditions, plays a fundamental role in any modern economy (Corduneanu)…
A sound financial industry primarily involves deep, efficient markets, solvent, operational financial intermediaries and a legal framework that clearly defines the rights and obligations of all participants. Financial markets are the core of any financial system architecture, holding a central position as they are a real catalyst for the overall economic activity. Depending on country-specific factors, culture and historical traditions, but also on the globalization of markets, national financial systems have both special features and common elements. Academic literature provides a classification of financial systems as follows: Bank-dominated financial systems (the German-Japanese model); Capital-market dominated financial systems (the Anglo-American model). If analyzing the characteristics of the financial systems over the past 30 years, we note the shift from the traditional bank-based orientation towards capital markets. Crucial elements of this change are monetary and financial integration processes and financial innovation. ...
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