Why does the banking industry need to be regulated

Supervision, enforcement and regulation Firms must be supervised to make sure they follow the rules of regulation. In order to make sure financial service providers are following the rules, supervision is often strict and intrusive.

Risk-based supervision refers to how closely firms are supervised on the basis of how much of a risk they pose to the financial system. Enforcement works to mitigate poor behaviour in the financial services sector. When a firm has not been adhering to the rules, steps are taken to make sure rules are regulated.

Deals Insights Job Analytics. Join Our Newsletter - Get important industry news and analysis sent to your inbox — sign up to our e-Newsletter here. Powered by. Receive our newsletter Sign up to our e-Newsletter here I consent to Verdict Media Limited publisher of Leasing Life collecting my details provided via this form in accordance with the Privacy Policy. Banking regulators enforce consumer protection regulations by conducting comprehensive reviews of bank lending and deposit operations and investigating consumer complaints.

A competitive banking system is a healthy banking system. Banking regulators actively monitor U. Although fewer than 40 banks account for more than 70 percent of all U. While all banks are regulated, not all regulations apply to every bank. This blog offers relevant commentary, analysis, research and data from our economists and other St.

Louis Fed experts. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System. On The Economy Blog. Doing this helps to protect your access to the banking services we all depend on every day. When trying to make profit they have sometimes not acted as safely as depositors or investors would like them to. The financial crisis showed this clearly. When banks are doing well and making money they might take too many risks assuming that everything will keep going well.

This is summed up by a quote from the CEO of Citigroup one of the largest banks in the world in , who said:. For example, some banks made billions of pounds from miss-selling PPI payment protection insurance to their customers. Regulation and strong supervision can help stop banks making similar mistakes in the future. Financial crises can cause people to lose their jobs, or face pay cuts, and many more will suffer from a higher cost of living.

Regulation helps to reduce many of the problems that could get a bank into financial difficulty. This will mean there will be fewer bank failures in the future. View more You may also be interested in Would you like to give more detail?

Press Spacebar or Enter to select. Our use of cookies We use necessary cookies to make our site work for example, to manage your session.

Necessary cookies Analytics cookies Yes Yes Accept recommended cookies Yes No Proceed with necessary cookies only Necessary cookies Necessary cookies enable core functionality on our website such as security, network management, and accessibility. Analytics cookies We use analytics cookies so we can keep track of the number of visitors to various parts of the site and understand how our website is used.

Skip to main content. Home KnowledgeBank Why do we regulate banks? Why do we regulate banks? We want to keep the financial system stable and individual banks safe.