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Confederation Life and RBC

But prices did fall soon people found themselves

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Unformatted text preview: ired to hold under the frac)onal reserve banking was downgraded. •  General oversight of the financial services sector lessened. Many point to the GLB Act as one of the causes of the current economic crisis, by crea)ng companies that were “too big to fail”, although that is open to debate. Banking Regula)on •  Why does the government regulate banks? –  Consumers deposit their savings into banks. The government wants to ensure that their money is protected from undue risk caused by ac)ons taken by the bank. –  They also do so to root out criminal ac)vity (like money laundering) that can happen through the bank). –  And as a means to ensure that there is sufficient credit available to keep the economy robust. Banking Regula)on •  Banks are given minimum requirements in which to be able to operate. •  Banks are required to have a certain amount of capital, determined by a measurement system (called the Basel Capital Accords) to minimize risk to the ins)tu)on. •  The frac)onal reserve requirement discussed earlier in the course also applies. Banking Regula)on •  Other requirements include a strict set of corporate governance guidelines, financial repor)ng and disclosure guidelines and credit ra)ng requirements (i.e. a ra)ng from a ra)ng agency such as Standard and Poor’s that indicates to investors and depositors how much of a risk this financial ins)tu)on is). U.S. Sub- prime Mortgage Crisis •  Aaer the dot- com bubble burst in the early 21st century, interest rates were kept extremely low to encourage investment. •  Financial service comp...
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