Regulations have a major impact on how financial institutions are managed, how they deal with consumers, the types of products they offer, the structure of the industry, and the types of risks they take. The interplay between financial institutions and their regulators is so intertwined that one cannot define an institution or understand what it does without understanding the regulations that constrain its behavior. Required:
Gain knowledge of why financial institutions are heavily regulated, and why politicians fear that their failures could badly damage local or national economies. Discuss the reasons why banks are regulated.