Differences in Financial Regulations Across the World

Financial regulation is a type of control also referred to as supervision which subjects financial institutions to various requirements, guidelines and restrictions. The goal is to help maintain the overall integrity of the financial system. The regulation is either overseen by the government or a single non-government organization. Generally, the regulation is also influenced by banking sector structures which directly impacts the various financial products being offered. However, financial structure and regulation while for the most part the same across the world also differ in multiple ways.

Banking Structure Differences

The structure, as well as the regulation for the banking system, varies across a multitude of countries as it does across each state in America. Back in 2001, three banks out of every four were chartered, as well as being regulated at both the federal and state level. In the past US banks didn’t permit interstate banking, and so they were limited to just branching activities. Though the restrictions were removed in the 90s even after over a decade there were still 8,000 insured commercial banks in addition to more than 1,500 insured saving financial institutions in America. Now contrast that with Canada’s banking laws which tend to favor mainly national financial institutions. Back in 2001, Canada’s banks have a tiny number of local banks. The same goes for Japan which despite its booming economy had just 170 banks back in 1998.

Insurance and Securities Powers

Generally, insurance and securities powers have been allowed in EU countries like the UK, Germany, and France, etc. In addition to similar trading partners like Japan, Mexico, and Canada. However, in America following the passing of the Gramm-Leach-Bliley Act in 1999, banks can offer securities but only through financial holding companies.

Industrial Firms and Investments in them

Right now, American banks have limited powers when it comes to being able to invest in industrial firms compared to the banks of Germany, Canada, and France. Also, industrial firms that have investments in banks are much more limited in the US as compared to the EU.

The Importance of Banks

When it comes to financial regulations banks, tend to play a much more significant role in the system in many countries like they do in the US. In the United States, a highly developed list of competitive financial systems and markets allow for banks to have a much more prominent role in regulation. For instance, despite the economy expanding by as much as $7.9 trillion in 2001, American banks and their share of financial services industry assets have been constantly shrinking for many decades.

It has been observed that pension plans and mutual funds have grown more rapidly than the banks themselves. Also, the robust growth of the financial markets has caused a shift in the financial services offered by traditional banks to other banks as part of the financial intermediaries.

Get Local Translators Onboard 

As a business that hopes to get into a new market, it is imperative to get local translators onboard. Locals can be invaluable assets especially if they also have a financial background. Having them can smooth out the transition process of adapting to new financial regulations of an adopted country.