Question

What is importance of bank regulation? Advantages and disadvantages of bank regulation? Example

Answer 1

Bank regulations are the standard rules and procedures which govern the practices of banks and financial institutions in a country. The importance of bank regulations are as following:

1. Bank regulations will help to improve the quality of banking operations in a country.
2. Enhance security to the account holders in different banks.
3. Standard banking operations and practices.
4. Strong banking system in a country.
5. Maintenance of minimum statutory balances to ensure security of the account holders.
6. Ease of doing business with easy access to loan and capital.
7. An enabler for a strong economy.
8. Minimization of banking frauds.
9. Accountability of financial transactions will bring all transactions under the tax net.
10. Contraction of black economy.

Advantages and disadvantages of banking regulations:

The advantages of banking regulations are as following:

1. Banking regulations will strengthen the economy.
2. Easier access to capital will help individuals to establish their own business.
3. The economy of a country will be prosperous.     
4. Incidents of banking frauds will be minimized.
5. The safety and security of one’ money will be enhanced.

The disadvantages of banking regulation are as following:

1. Too much regulation can be a roadblock to the progress of an economy.
2. Difficult to access funds for business with number of regulations.
3. Despite number of regulations the instances of financial frauds have not stopped completely.