The Prevention of Economic Expansion and Research with Financial Regulations

Published: 2021-06-17 09:39:26
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Category: Finances, Economy

Type of paper: Essay

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A business that deals with financial transactions such as deposits, withdrawals, investments, and loans is a financial institution. There are several kinds of financial institutions like commercial banks, investment banks, insurance companies, etc.

Commercial Banks
Commercial banks offer a wide range of services to individuals and business in the community. With services like savings accounts, checking accounts, loans, and credit and debit cards commercial banks make the everyday life easier. Essay due? We'll write it for you! Any subject Min. 3-hour delivery Pay if satisfied
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Investment Banks
Investment banks are financial institutions that deals mainly with buying and selling stocks, raising capital, corporate mergers and acquisitions, and securities trades. They help companies to go public with initial public offerings (IPO).
Insurance Companies
Insurance companies are companies that provide a security for illness, damages, fire, accident and even death by collecting premiums from people who want to protect themselves.

Financial regulations are a set of regulations for financial institutions. These regulations have certain guidelines and restrictions which help maintain the financial system of a country and are portrayed by certain government authorities or financial regulatory bodies which differ from country to country.
The impact on an economy’s development depends on the quality of financial regulations and supervision. Financial institutions help develop an economy in many ways. For example, these institutions are big enough to loan money to individual and business who have a potential successful project which can boost the growth of the economy. This is only possible if the regulations of financial institute implemented are not too complicated. And also, too many regulations can cause these financial institutes’ difficulties and complications when giving out loans and mortgages. And if these regulations are not strictly governed it can lead the economy to face many problems like a financial crisis which can cause a reduction in the expansion of a countries economy.
A recession is when there is a significant decline in the economy’s GDP (Gross Domestic Product), income, employment, sales, and industrial production. A recession is destructive, it causes many people to lose their jobs which can lead to a fall in sales. The fall in sales will cause the business to go bankrupt and unemployment. Also, many people tend to lose their house due to them not being able to pay back the mortgages. Usually a recession is short, and last around 9 to 18 months, but the impact is long lasting.
An example of a major economic recession is the subprime mortgage crisis of 2008. Which was caused by the bursting of the real estate bubble in 2006 which led many banks go bankrupt due to a lot of unpaid mortgage loans, this was because the loans were given to people who were not able to pay the interest. The mortgages were divided into several small mortgages and were put into a bond with other similar mortgages and were sold to the public. These bonds were issued by the investment banks. When the loan takers were not able to pay the interest, banks started losing their money and they were not able to sell the property bought from the mortgages because no one hand cash in their hand and there was no money in the bank which caused the prices of property to go down busting the real estate bubble and leading to a financial crisis around the world because the bonds were sold from one bank to another bank around the world.

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