Banking Law: Lesson-3

Objectives of bank regulation:

The objectives of bank regulation, and the emphasis, vary between jurisdictions. The most common objectives are:

1. Prudential—to reduce the level of risk to which bank creditors are exposed (i.e. to protect depositors)
2. Systemic risk reduction—to reduce the risk of disruption resulting from adverse trading conditions for banks causing multiple or major bank failures
3. Avoid misuse of banks—to reduce the risk of banks being used for criminal purposes, e.g. laundering the proceeds of crime
4. To protect banking confidentiality
5. Credit allocation—to direct credit to favored sectors
6. It may also include rules about treating customers fairly and having corporate social responsibility (CSR)