Every month I get my bank statement. Every
month I go to bank to deal with some affairs of my account at average three
times. Understandably, bank is an essential part of human life nowadays.
When I read some materials related to the topic
that I interested in, I find, in some researchers’ opinion, bank is so vital
that it matter for human’s welfare and accounts for economic growth.[1]
In our lecture notes-topic four, bank
regulation and supervision is defined as a government intervention. It requires
banks to act in certain principles, disciplines and even laws.
For some investment activities, they have
more risk but more profits. So some banks may tend to engage in this kind of
investments. For example, invest in real estate or issue great loans to those
firms and individuals, which are not well operated or do not have good creditor.
Hope we all remembered the banking crisis not long ago. Some evidences show
that in developing countries, the cost of banking crises has exceeded 1 trillion
Dollars since 1980. [2]This
maybe one of the reasons why bank regulation and supervision is worth discussing.
Another reason may be some banks will come
together to be a syndicate if without some restrictions. They will monopoly the
market, which do harm to the competition and efficiency. More seriously, if
they collude with some political parties, they will be too powerful to control.
It will cause a disaster not only for people but also for banks.
[2] J. Barth, G. Caprio, and R. Levine, Rethinking Bank
Regulation: Till Angels Govern, Cambridge University Press, forthcoming.
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