Answer to Question #66301 in Finance for Abdul
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) to 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.
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