The subprime crisis was also an outcome of negligence of financial regulatory body as well as the professionals engaged in accounting and auditing process. To have a better understanding of financial crisis the role of government, regulatory body, accounting system & standards, political environment and capitalism needs an analysis.
From 2001, the Lamfalussy framework was introduced in EU system of supervision and regulation. The framework was arranged in four separate levels and published by European council (Great Britain: Parliament: House of Lords: European Union Committee, 2009, p.12). These regulations are responsible for making the accounting and auditing process more transparent. After the great depression, International Monitory Fund and World Bank were established to avoid the causes which actually results into depression. But these regulatory bodies are almost 65 years old and are ill equipped to handle the complex banking environment of 21st century. Almost all the major economies have their own regulatory bodies, like Financial Services Authority (FSA) of UK and the Securities and Exchange Commission (SEC) in US, but they failed to check the financial crisis. Even the Basel II Accord agreement that was published in 2004 failed to detect and control credit crunch. Many banks are blaming Mark to Market system for development of such a disastrous financial crisis (Rayner, 2008). The financial system is based on the trust and faith, but collapse of Lehman Brothers, Bank of America and PNC Bank Corp are few examples of how the policymakers and regulators failed to maintain people’s faith in them. Most surprisingly America’s financial system failed to manage risk and proper allocation of capital (Stiglitz, 2008).
Fair Value Accounting or US Accounting Standard FAS 157 is basically used for determining fair value or market value of the assets and the liability. Many critics argued that fair value accounting is highly ...
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The requirements of each profession are usually clearly defined in the laws regulating the relevant sector. In accounting, a similar practice has been used. Accounting profession, like all professions, is based on a series of ethical rules and standards set both by the law and the national organization related to the specific field (Solita and Fajardo 2008, p.2).
Such a connection dates back to the time of Great Depression in 19301. Similar is the case of global meltdown of 2008-09. These are supposed to be the price paid for central banks’ improper actions and banking sector’s engagement in speculative activities.
Name Surname Supervisor Subject Date Hedge Funds and Their Role in 2008 Financial Crisis Hedge funds are private investment funds that trade in stock market and formulate many strategies to earn absolute profits regardless of whether the market moves up or down.
Both legal and ethical regulations exist in the sector to ensure stability and protection of stakeholders’ interests. Securitization, another concept in the financial sector, defines the pooling together of debts and selling them to investors who then earn interest from the debt’s proceeds and is an important concept towards provision of financial services.
This essay specifies concrete measures, undertaken by the government to overcome the negative effects of the crisis in the finance industry. These included such steps, as creation of regulatory agencies for financial products, stricter banks monitoring, new laws formulating, implementation of new regulations and others.
On the other hand, it is argued that financial market regulation imposes significant costs to an economy that outweighs the benefits (Benston, 1998).The debate remains unsettled. In this essay, the failure of financial regulation in UK in the light
There are numerous driving and motivating factors that stimulated the implementation of the financial regulation. There are some driving forces that culminated the need of implementing financial regulations.
Banking regulation involves regulation and supervisions that ensure that banks adhere to guidelines and regulations that aim to promote integrity in the banking sector. Regulation therefore ensures the banks are open and transparent with their customers to prevent cases of
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