Chapter 2

Regulatory Environment of Financial Institutions

Abstract

Financial regulations are laws and rules that govern financial institutions. Regulations of financial institutions focus on providing stability to the financial system, fair competition, consumer protection, and prevention and reduction of financial crimes. By the mid-1970s, the global financial system witnessed market-oriented reforms that led to liberalization in the financial system, such as the reduction of interest rate controls, removal of investment restrictions on financial institutions and a line of business restrictions, and control on international capital movements. The modern trend observed is that financial sector regulation is moving toward a greater cross-sector ...

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