Is the deregulation of financial institutuions a good idea?

Is the deregulation of financial institutuions a good idea?

 

 

Answer:

a structure is needed to solve scale and agency problems which can be done by partnership model. the main motives of banks are to give retail bankers trust in the system and to feel comfotable to put their investments and to prevent catastrophic collapses. banks are no longer systematic. banks are highly regulated and the process of lending is highly regulated and this lacks the competition and so the barriers to entry are more and therefore the bank is oligopoly. banks are also investment banks but the hedge funds and equity funds require good enterpreneurial skills and there are very few investment banks as banks became oligopoly due to regulation. the deregulation involves full tranformation even though the market remains same, there are differences in new entrants who now win, things becoming cheaper. one example is that Walmart could not offer financial services due to bank related regulation though in which many low income Amercians were beneficiaries. while in deregulated system many other forms of bank would emerge and companies would offer many banking services, credit unions and other initiatives. so it is an good idea as the supply of credit can be increased through low systematic risk from financial systems ], which are not banks.

Asked on February 13, 2018 in economics.
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