Global Financial Regulatory Institutions

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There are a number of different regulatory bodies, ranging from the Federal Reserve, which supervises the commercial banking industry, to FINRA, which oversees brokers, to the Securities and Exchange Commission, which oversees the securities markets. Federal and state governments have an array of agencies in place to regulate and supervise financial markets and companies. For instance, in New York state, the Department of Financial Services (DFS) oversees and regulates the activities of about 1,500 NY-based banks and other financial institutions, which hold assets of over $2.6 trillion, and over 1,800 insurance companies, which hold assets of over $4.7 trillion.

The FSA (Financial Services Authority) provides market access, regulates international markets, and protects end investors. The SEC (Securities and Exchange Commission) provides transparency in the financial markets, oversees market actors’ activities, and penalizes violations of regulations.

The IOSCO facilitates the advent of standards for trading in international markets, collaboration among market authorities in their surveillance activities, and collaborative thinking about the functioning and regulation of markets. All countries are also developing suitable frameworks for the smooth operation of markets for financial instruments.

In the global finance environment, solutions are dependent upon international standards and financial regulatory coordination. Efforts to coordinate internationally, with governments converging around a set of standards, could actually make the financial system more exposed. A further argument in favour of international coordination is that individual countries, making decisions on their own, lack sufficient incentives to undertake robust oversight and regulation of their own financial firms and markets.

Countries with banking-based financial systems and those with market-based systems could take similar approaches to the regulation of their banks and securities markets; the relevant difference would be to what sets of regulations they devoted most enforcement efforts. Financial systems should be regulated differently depending on whether they are dominated by banks or securities markets.

The board also monitors and regulates the banking system in order to ensure the financial systems stability as a whole. The Federal Reserve conducts monetary policy, monitors the banking system, maintains the stability of the financial system, and provides several services, including management of the Federal Wire Fund Transfer System. In the United Kingdom, the Bank of England provides for the integrity and stability of currency, the stability of financial systems, and the effectiveness of financial services.

The ECB sets regulations on the operation of banking and money markets of the Eurozone. Its mandate is to strengthen regulation, supervision, and practices of banks around the world, aiming at increasing financial stability. Together with the Bank for International Settlements, it undertakes periodic assessments of the financial sector, intended to provide external oversight on the financial soundness and regulatory practices of its members.

Lathams Financial Regulation practice has worked closely with regulators across the U.S. (U.S.), Europe, Asia, and the Middle East, applying both domestic and global regulations affecting clients’ business operations. It brings together domestic authorities tasked with ensuring financial stability in major international financial centers, international financial institutions, international groupings of specific industry-specific regulators and supervisors, and central banking expert committees. Members include not only central banks and other supervisors, but financial standards-setting bodies such as the International Association of Insurance Supervisors and the International Organization of Securities Regulators. Our clients include many of the world’s leading banks and largest financial institutions, bank holding companies, brokerages, investment firms, insurance and reinsurance companies, exchanges, fund managers, SEFs/MTFs, clearing and settlement providers, and payment providers.

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