Were the Real Financial Regulators Actually Existed?

In the world of finance, there are thousands of systems created to keep financial institution in a sustainable position and it make an extremely complex to handle. That is why regulator employed in it, basically to block the governance problems which I had explained in the last blog post. According to Suarez&Weisbrod (1996), regulators are the one; either nongovernment or government body that provide and give clarifications on the banking’s working procedures for everyone’s confidence

At this time, the more solemn debate among quite a lot of parties is occurred because they wondered whether the regulators are there in between financial institutions to regulate them. The most powerful background was the challenge of banking and global financial crisis back to several years ago when the corporate governance was not clearly constructed- giving worst impact to the world economy.

Until these days, I can see that demanding problem regarding to this has not been successfully resolved. Do you consider that this down to the regulators’ work absence or actually there are some others that could make it? It is seen from George Soros analysis that regards to the European banking system. (Worstall, 2012) He sees that regulators were not doing as it is supposed to be because it was such a really odd approach when they created capital weights on sovereign debts. This was from the regulators’ permission from banking industries to take much hold on government bonds and left Germany struggled with its operation at the end, while others like could just easily enjoy the cheap credit offered.

As commercial banks have successfully made a use of those weaker bonds that would increase additional benefits, I consider that this could bring bad impact to the banks itself and in turn to a competition that digressed since this occasion gives emphasis that the credit wouldn’t be that worth enough to be given to the other countries. This accordingly countered to one of Minsky’s (2003) explanations which covered that ‘debt burden and falling appetite put upward pressure on interest rates’ as the fact low credit interest rate were given.

Today, comparable stories also occurred. Not capital weights’ problem but another time, Heritage Bank of Florida finally failed in the market on November 2^nd last year because of the customers’ late payment of debt (asset troubled ratio), in addition to Frontier Bank’s fraud (the fraud from bank explained in my previous writing - BCG) which due to its employee’s scam.

Though different cases are happened, it actually figured out my thought to answer the primary question of ‘Were the real financial regulators actually existed?’ Based on this case I realized that therefore regulators are definitely existed to regulate; not their fault, however they had performed inadequacy of exertion though this can be said that it all about the irresponsibility and mismanagement from the banks itself.

At this point, I see justification from the regulation and penalty settings developed by the regulators, for instance Frontier’s Senior Executive who correspondingly been arrested for doing such immoral action that disadvantaged many parties. But then through anything, besides risk management made by the bank, regulators should anticipate and control what the banks are actually doing which is the only factor to blame. In fact banks indeed rewarding the risk taking, yet regulators must control their risk taking.