What is financial deregulation?
Financial deregulation may refer to a number of changes in the law that enable financial institutions to be more freedom in how they compete. Whether such changes are beneficial or harmful to the economy as a whole have been widely discussed. It is important to note that financial deregulation does not mean the removal of all rules or regulations.
The best-known form of financial deregulation in the United States came in 1999, when Congress canceled part of the Glass-Steagall Act. This act, which was approved in 1933 during depression, meant that each company could only act as a Komerční banka, an investment bank or an insurance company. Komerční banka offered customers economical and loans, while the investment bank fulfilled functions such as selling securities, trading in foreign currencies and auxiliary companies in mergers. One of the main arguments of the lifting of the law in this way was to limit the effects of economic cycles on individual companies. For example, people with a greater probability of UŠThe scratches during the decline, but are more likely to invest when they are better. Financial deregulation would therefore theoretically mean that companies could grow size and permanently bring business.
It was also argued that deregulation would evaluate companies more competitive. They would be able to work more efficiently, especially where two companies from different sectors merged and gathered their resources. This could also help business as a whole, because competition and efficiency would reduce the financing of capital investments for companies.
Critics of financial deregulation claimed that this caused or supported the banking crisis that began in 2007. It is said that the removal of barriers between different typesfinance institutions caused conflicts of interest. For example, a company that was formerly a Komerční banka and had many consumers and entrepreneurs customers could now take too many risks, ProtShe tried to compete in the investment and insurance sector. Critics also argued that deregulation allowed individual financial institutions to become so big that the government would have to enter when they fought rather than let them fail and risk damage to the whole economy.
In the UK, there was another form of financial deregulation involving construction companies. These are financial institutions that were owned by their customers rather than shareholders and specialized in mortgage loans. After building companies began to compete more with banks at the age of 80, the government changed the law to allow them to demutualize them. This meant that if members of the company agree with the vote, this could change to a limited liability company. Since then, everybuilding of the Society, which demutualized, has either been bought by the bank or the government has taken it after financial problems.