A well-functioning financial system is vital for the economy, businesses, and consumers.
Financial regulation is part of ensuring the safety and soundness of the financial system
and protecting consumers.
WHAT IS FINANCIAL REGULATION?

Financial regulation refers to the rules and laws firms operating in the
financial industry, such as banks, credit unions, insurance companies,
financial brokers and asset managers must follow. However financial
regulation is more than just having rules in place – it is also about the
ongoing oversight and enforcement of these rules.
WHY IS FINANCIAL REGULATION IMPORTANT?
 All of us depend on the financial system in one way or another. For example,
savers rely on banks to have their money available when they need it.
Businesses need to be able to borrow to maintain and develop their business.
Consumers taking out a mortgage or insurance may need to get advice on
the best product for them. In the case of insurance companies, policyholders
rely on getting claims paid when something goes wrong.

Poorly regulated financial institutions have the potential to undermine the
stability of the financial system, harm consumers and can damage the
prospects for the economy. That’s why strong financial regulation is important
– to put rules in place to stop things from going wrong, and to safeguard the
wider financial system and protect consumers if they do go wrong
ROLE OF REGULATION IN FINANCIAL MARKETS
Regulations of financial institutions focus on providing stability to the financial
system, fair competition, consumer protection, and prevention and reduction of
financial crimes.
 Ensuring firms have the funding to trade safely, have the appropriate risk
controls in place and are appropriately governed is known as “prudential
regulation”.

Ensuring firms treat customers fairly from the sales process to how
complaints are managed, is known as “consumer protection”

An important part of prudential regulation is authorisation. We call this
our “gatekeeper role” and means we only allow firms to operate in the
financial system once they have fulfilled a number of criteria, including
governance and risk control.

Consumer protection rules are also in place. These spell out how firms must
treat their customers when selling them financial products. So for example, a
regulated firm must ensure that it “acts honestly, fairly and professionally in
the best interests of its customers and the integrity of the market”.
The goal of regulation is to prevent and investigate fraud, keep markets efficient and
transparent, and make sure customers and clients are treated fairly and honestly.