Why does the financial industry need to be regulated Research Paper

Why does the monetary persistence use up to be set - Research Paper ExampleA sound financial industry primarily involves deep, efficient markets, solvent, working(a) financial intermediaries and a legal framework that clearly defines the rights and obligations of all participants. Financial markets are the core of any financial system architecture, holding a central position as they are a very catalyst for the overall economic activity. Depending on country-specific factors, culture and historical traditions, but also on the globalisation of markets, national financial systems have both special features and common elements. Academic literature provides a salmagundi of financial systems as follows Bank-dominated financial systems (the German-Japanese model) Capital-market dominated financial systems (the Anglo-American model). If analyzing the characteristics of the financial systems over the past 30 years, we communication channel the shift from the traditional bank-based o rientation towards neat markets. Crucial elements of this change are monetary and financial integration processes and financial innovation. As part of financial industry, the US financial companies enhance money flows by offering various services in different areas accounting, bank and computer address unions, consultancy, insurance agencies, investment banking, professional services, earnest brokers, venture capital. With combined yearly tax revenue of al to the highest degree $65 billion, the US accounting and fiscal industry sums more than 90,000 companies (Richardson). The leading players providing accounting services include Price Water House Coopers, Deloitte Touche Tohmatsu, Ernst & Young, KPMG and H&R Block. The same recent statistical data reveal the structure of the US banking system considerationd by 8,000 mercantile banks, 1,400 savings banks and 10,000 credit unions with combined annual revenue of $600 billion. Bank of America, JPMorgan Chase, Citibank, and Wacho via are the most in good order commercial banks. The US banking market is highly concentrated, 50 largest institutions spreading more than 60% of the financial industry. The credit union environment displays a fragmented anatomy with 6% of industry revenue, much lower than commercial banks percentage (80%) and closer to savings banks, with a share of 14%. Financial planning and consultancy services shape an industry with annual revenue of $15 billion split between 10,000 US firms. Morningstar, Value landmark and units of financial services companies are in the top. In the field of insurance services, the 130,000 US units generate annual revenue of $85 billion, having as market leaders March & McLennan, Arthur J. Gallagher and Aon. Investment banking is served by 2000 companies with annual revenue of almost $110 billion, with the largest 50 firms holding 90% of the sector. Morgan Stanley and Goldman Sachs are the key competitors. The securities brokerage industry includes less(pren ominal) than 4000 bodies, while the major players in investment companies are Merrill Lynch, Charles Schwab, AG Edwards, and brokerage companies like Citigroup and Fidelity. Venture capital industry generates annual revenue of about $26 billion and has more than $250 billion under management. The most important companies include New Enterprise Associates, Kleiner Perkins Caufield and Byers, and Technology Crossover Ventures. Why does the financial industry need to be regulated? The empirical literature (Goodhart et al.) and practical experience point out three important reasons that justify government intervention in the financial industry 1). Information asymmetry unlike financial institutions, customers are much less informed, so that financial supervision aims to balance the situation 2). Externalities the collapse of an