Why are banks sheltered from the competition? What are the two major Acts that provided the...

Why are banks sheltered from the competition?

What are the two major Acts that provided the protection from competition?

Which new legislation repealed those?

Solutions

Expert Solution

1) Banks are sheltered from competition: the reason behind this is that first, competition may lead to risky lending practices as financial institutions search for high margins of profits. This is risky. Secondly, higher competition may affect the bank's profit margins and leave them with insufficient capital. This also played a major role in the recent crisis.

2) Acts that provided the protection from competition:

Some of the two acts that provides the protection of bank from this are:

(i)In India The Banking Regulation Act, 1949. (Act No 10)This act is applicable to the whole of India.

(ii) the competition act 2002 implemented in India.

3) Legislation that repealed these:

To the approval of many in banking industry, Congress repealed the Glass-Steagall Act in November 1999. The establishment of Gramm-Leach- Bliley Act eliminated the Glass-Steagall Act's restrictions against affiliations between commercial banks and investment banks.

Rahul Sunny answered 2 years ago

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