Question

Please respond to the following:

• Research the websites of the Federal Deposit Insurance Corporation, the Federal Reserve Board, or the Office of the Comptroller of the Currency to locate and read about a recent (within the last twelve [12] months) U.S. banking regulation that has been adopted. Determine the affect the regulation you researched will have on the global economy. Provide an example or evidence to support your response. Determine an area that appears to have too much government regulation regarding commercial banks and the risk the regulation addresses. Suggest an alternative regulation.

Answer 1

The economic growth, regulatory relief & consumer protection act was signed in united states by president Donald trump in may 24, 2018 in order to ease the regulations imposed by Dodd-frank act. This is a bill that has been passed to promote economic growth, provide tailored regulatory relief & also enhance the consumer protections. The act has raised the threshold limit to $250 billion from $50 billion where banks are deemed too important for the financial system to fail.

Following are the provisions of the act:

• The act permits the banks with assets between $50 to $250 to run with less regulatory oversight from financial stability.
• Banks having less than $10 billion in assets have been exempted from the Volcker rule.
• It requires the Federal Reserve to take the size of the banks into consideration rather than “one size fits all” concept.

Banking regulation is a form of government regulation which subjects banks to certain requirements, restrictions & guidelines in order to enable transparency between banking institutions & individuals & corporations with whom they conduct business.

A particular area that has been taken is the monetary policy. The monetary policy is the process by which monetary authority of the country who can be the central bank or the currency board which controls the cost of very short term borrowing or the monetary base. It often targets the interest rate or the inflation rate in order to ensure price stability.

The monetary policy is considered to be more of a blunt tool in terms of expanding & contracting money supply in order to influence inflation & it also has less impact on the real economy.

An alternative regulation can be the fiscal policy because its actions based on considerations that are not entirely economic. It is also used by the government when it wants to stimulate the economy.