The aim to improve regulations in the financial and banking system is to ensure stability in the financial and banking market. For this it is important to understand how financial stability can be improved and how to enhance supervisory control over financial institutions. Due to this it is important to ensure a regulation is in place, it is essential to keep track of the speculative investments into assets.
However, draconian measures to curb any form of speculation will be counterproductive. Regulation must limit the speculation of asset trading which will make the market less volatile. Further there should tests in place to determine the interconnectedness between markets that will help in understanding the source of volatility in the prices and the market. Further, the regulation should inculcate mechanism to test and check the pressure on building volatility in the market. Increasing public transparency of the market is essential to reduce the speculative tendencies of the investors. Further, regulations should be more vigilant of the financial and banking law violations that would reduce the fear of a shock to the market.
These measures are cost effective and would reduce the risk for the bankers, financial institutions, as well as the investors as this will significantly reduce the risk of volatile movement in the financial market. Creating financial bonds by banks would ensure the speculative investors to take enough risk to satisfy fines due to the bank’s misbehavior (Dudley par. 17). Further, there must be a database that keeps track of all the people involved in illegal financial trading and transactions in order to protect from further damages.
Works Cited
Boesler, Matthew and Jeff Kearns. ‘Revolving Door’ Between Fed and Banks Spins Faster. 2015. Web.
Dudley, William C. Testimony on Improving Financial Institution Supervision: Examining and Addressing Regulatory Capture. 2014. Web.