Question

explain the need to subject international Banks to significant international regulations

Answer 1

The main need of banking regulation is to avoid highly negative consequences for the economy of widespread economy failures.Systematic risks in the banking system can damage an entire nation and the failure of one institution can lead to failure of another institution.Banks left on their own will accept more risk than optimal and this is the basic reason for regulation of banking activities and establishment of capital requirements.International banks have operation in different countries.They can be easily used to launder money.Thus, banks need to have safeguards against such activities so that they do not suffer legal consequences in any country that they work in. This will help in reducing the financial crisis that have been seen previously.The approach that is adopted by number of standard setting bodies was provided Basel Committee on Banking Supervision. Recommendations of the Basel Committee have greater force than many Treaty-based agreements.