Please enable JavaScript.
Coggle requires JavaScript to display documents.
Banking regulation (Aims and learning objectives (Understand why banks…
Banking regulation
-
Free banking
Unregulated banking
Regulation by fund providers, depositors and shareholders
-
No central bank, money regulator or government intervention
Financial intermediaries operate freely, subject to market forces
Without regulation, depositors need more reassurance that their deposits are safe
-
-
-
Conclusion
Since depositors are risk-averse, the banks are forced to take on the amount of risk depositors want them to take
-
-
Risks face by banks
-
Credit/Default risk
-
-
Influenced by the economic cycle for domestic lending and country-specific risks in the case of international lending
Market or price risk
-
-
Price risk can affect the following: foreign exchange, derivatives, equity and bonds (interest rate risk
Operational risk
Risk of loss resulting from inadequate internal processes, people or systems or from external events