You must have Credits on your Balance to download this sample
Compare and critically evaluate ring-fencing and total separation approaches to banking regulation
Finance & Accounting
Pages 4 (1004 words)
Name: Tutor: Course: Date: University: Introduction Over the recent past decades, immense changes and growth in the financial sector across the globe have emerged. It is worth noting that, within the same period, a high number of countries across the world have suffered banking crises, which in some situations have resulted into costly bank failures and by extension severe economic disruption.
al. 2004, p.208). This paper looks into two banking regulation approaches, which are the ring-fencing and total separation strategies. Approaches to banking regulation Ring-fencing Ring-fencing is a strategy that structurally distinguishes retail banking activities from wholesale and investment bank activities. Ring-fencing mainly focuses on ensuring that provision of services is not interfered with in case of a bank’s failure. Secondly, ring-fencing aims at making it easier and less costly in resolving banks. Thirdly, this approach controls incentives for excessive risk-taking. Apart from the three main objectives of ring-fencing, this approach offers several benefits such as insulating vital UK retail bank services from global financial crises, it allows for an easier monitoring of banks under ring-fencing and in a much transparent way. The other possible benefit is the ability to promote competitiveness because UK retail banking can be made safer (Bertsch 2012, p.2). The ring-fencing approach offers a number of advantages compared to the total separation approach of bank regulation. ...
Not exactly what you need?