A Changed Landscape for Financial Services

he fundamental objective of govern-ment regulation and supervision of the financial-services industry is to maintain the integrity and stability of the financial system and to pro-tect depositors and investors. The regulation deployed to this end requires safety-net mecha-nisms such as lender-of-last-resort facilities for banks and some form of insurance for deposit-ors. It also includes standards for sound finan-cial behaviour by individual institutions, among them: minimum amounts of capital and liquid financial assets institutions must have as a buffer against unanticipated events; requirements for effective risk-management systems and oversight by managers and directors; prohibitions on lend-ing by management to itself or closely related entities (‘self-dealing’), on insider trading, and on other transactions where there is a conflict of interest; and requirements that individual insti-tutions disclose key information on their per-formance to the market. Regulations also maintain the integrity of trading systems and ensure that financial institutions carry out thei