Regulations have a major impact on how financial institutions are managed, how they deal with consumers, the types of products they offer, the structure of the industry, and the types of risks they take. The interplay between financial institutions and their regulators is so intertwined that one cannot define an institution or understand what it does without understanding the regulations that constrain its behavior.
The objective of this assignment is for you to gain knowledge of why financial institutions are heavily regulated, and why politicians fear that their failures could badly damage local or national economies. This will help you apply and integrate all of the course objectives for FIN507. This assignment has two milestones, with the final project due in Module 8.
Your project must include the following elements:
Discuss the reasons why banks are regulated. Describe the history of bank failures in the United States; the steps policy makers have taken to reduce the incidences of failure; and the lessons learned from previous bank failures. Provide details on how this plan is evaluated from success to failure. In other words, provide scenarios or key drivers to help determine the plan’s success. Explain why bank regulators are so concerned about capital adequacy for the banking systems. Describe the responsibilities of the various bank regulatory agencies.