Financial regulation is very crucial for any economy of a country since it ensures that financial service providers operate in a safe and sound manner. Ensuring that financial services providers serve state and the local credit market is the main role of financial regulators. For you to understand the importance of financial regulation to a country's economy, you need to understand what the term means before we go any deeper. Financial regulation refers to the supervision of financial institutions to certain rules and guidelines. It is important that financial institutions are supervised to the rules and regulations to ensure that they operate legally and in an honest manner. The supervision can be done by a government or a non government when it comes to financial regulation. That is the main reason hey a financial regulator does not have to be a government organization.
There are several different benefits that the economy of a country can enjoy as a result of financial regulation. Increase in the variety of financial products that are available for customers is the first benefits that a country's economy can benefit from as a result of financial regulation. The second benefit that comes along with financial regulation is the improvement in confidence in the financial system. People can lose confidence in the financial system without financial regulation hence the economy can be affected. With financial regulation, financial stability is another benefit that you can get.
The economy can prevail when there is financial stability in any country, and that is the reason being financially stable is crucial for any state. Consumers of the financial services can get the right protection against exploitation through supervision of financial institutions. It is evident, through the above mentioned reasons, that financial regulation is crucial for the economic wellbeing for any country. Chartering, licensing and supervising state chartered banks is the main role of regulators, whether government or non government, in financial regulation. Other than supervising state chartered banks, the other function of financial regulators is chartering and licensing non bank financial service providers. When it comes to non bank financial service providers, the list includes mortgage lenders.
The main reason why financial regulators need to have quality skills is that financial regulation is a complicated matter. One of the skills that a financial regulator needs to have for them to ensure proper financial regulation is effectiveness. Working with objectivity is necessary for a financial regulator to combine well with government initiatives that are focused in ensuring a smooth and robust economy. A financial regulator whether government or non government, needs to act proportionally. Being proportional is crucial for any financial regulatory body since it ensures that they do not lay a weight on either the consumer or the financial institutions that they are supervising.