Thursday, May 16, 2019

Regulatory Response to the Financial Crisis which began in 2007 Essay

Regulatory Response to the Financial Crisis which began in 2007 - strain Example1). The debate still rages as to the real cause of the crisis. King (2011, p. 48) indicates that a major indorser to the global crisis was global imbalances which requires rebalancing of global demand in order to facilitate a sustainable recovery. This makeup provides a brief synopsis of the events and the regulations which followed in the US, Germany, UK, Netherlands and Spain. consort to Blundell-Wignall and Atkinson (2010, p. 2) every banking crisis has been associated with major disruptions as well as recessions and this is the reason for certain bank regulations. New regulatory responses are generated by every global fiscal crisis (Helleiner 2010). This was no different for the crisis which started in 2007 resulting in what has been describe as the Great turning point. Regulatory Response in the United States According to the U.S. Senate Republican Policy Committee (2010) a multitude of events l ed to the Great Recession of 2008-2009. They include the housing bubble which was caused by cheap credit made to persons who would not qualify for a loan under normal circumstances low interest rates failure of regulatory agencies and high-minded rating grades provided by credit rating agencies. In order to mitigate the crisis United States government introduced what they described as Targeted Asset Relief Program (TARP) and the Temporary Liquidity Guarantee Program (TLGP) (Eubanks 2010b, p. 2). The TARP was afterwards expanded to include automobile companies such as GM and Chrysler (U.S. Senate Republican Policy Committee 2010). A number of regulatory proposals were put forward in relation to consumer protection, modernisation of the regulatory schema and restoring stability (Eubanks 2010a). These led to the Dodd-Frank Wall Street Reform and Consumer Protection Act of July 2010 and a consolidation of the regulatory bodies. The prey of the present is to create a sound economi c foundation to grow jobs, protect consumers, rein in Wall Street and big bonuses, end bailouts and too big to fail, prevent another financial crisis. According to Lo (2009, p. 27) there has been a recent proposal to suspend Fair-Value FASB Statement No. 157. Fair-value or mark-to-market accounting requires the valuations of firms addition at fair market prices and not on a historical cost basis. The practice which has labored a number of firms to write down their assets and thus triggering defaults and insolvencies has been blamed for the financial crisis. Regulatory Response in Germany In Germany the single regulator of financial services the German Financial Supervisory Authority which was schematic in 2002 in order to improve stability and integrity in the German financial system had its regulatory authority greatly increased in 2009. This was done in order to improve its efficiency to manage the financial crisis. The act for strengthening the financial market and insurance supervision became effective on August 1, 2009 (Eubanks 2010b). This act was a measure which had the objective of increasing the preventative, supervisory and intervening powers of this regulatory authority. The act also facilitated the strengthening of informational and reporting requirements for financial institutions, insurance companies

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