Explained in details Essay Example | Topics and Well Written Essays - 3000 words

Explained in details - Essay ExampleMoreover, seekers have pointed out sever limitations in the policy instruments which are utilize to regulate the financial markets. The current paper attempts to answer why and how the public financial markets must be regulated to minimize the adverse effects of crisis to the world economy. The specific objectives of the current airfield are (1) to assess the need for modulate the financial markets and (2) to propose an effective framework for managing the financial strategys. For this purpose four selected research publications which are focused on financial market regulations are thoroughly reviewed in terms of the rational, mechanisms, limitations and take chancess presented in each study. Next in relation to the nerve center of the above studies, the management framework of the EU zone banking and financial crisis, 2008 is evaluated. Beginning of the Financial and Banking organizations failure National Bank Act and state banking laws wh ich were imposed later 1933 restricted the activities of commercial banks to specific geographic locations and heavily used Federal deposit insurance and Federal Reserve funding to protect the banking system against risk and uncertainty. The above financial markets were largely stable and fairly profitable however, there was limited space for evolving the system. Towards the late 1960s depositors and investors found the above financial system inefficient in providing their dynamic and complex needs. Development of a overshadow banking system which integrates the traditional lending activities and capital markets activities began during the early 1970s. Shadow baking system heavily adopted securitization and derivative instruments in place of real money. Traditional linkage between the depositors and commercial banks in lending activities largely deteriorated in shadow banking system. Recent financial crisis is viewed as an after math of exploding the above system (Tarullo, 2012). Organization of the Report segment 1 of this paper describes the characteristics of the financial markets, need for regulating and regulatory mechanisms used by the governments. This section of the paper is largely based on Regulation of Banking and Financial Markets by Dirk Heremans (1999) and Regulatory Reform since the Financial Crisis by Daniel Tarullo (2012). In the part 2, limitations and risks of regulating the world financial markets are described by using the A crisis of Politics, Not Economics Complexity, Ignorance, and Policy Failure study by Jeffrey Friedman (2009) and The Bailout through a Public Choice Lens Government-Controlled Corporations as a Mechanism for Rent Transfer study by J.W. Verret (2010). Part 3 contains implications of the above arguments in relation to the real world scenarios. Finally, the conclusions drawn from the literature review and examining the real world case scenarios are outlined in Conclusions. Part 1 Characteristics of Financial Markets an d the Need for Regulating According to Dirk Heremans, 1999, financial markets are imperfect and contain unique characteristics (i.e. risk & uncertainty, information asymmetry, heard behavior and see on money circulation) which demand systematic government intervening (pp 953). Risk and uncertainty in the financial mar