A Review of Financial Regulations to Avoid the Nationalisation of Losses in the Banking System
This article investigates the regulations which should be applied in the financial system in order to minimize the losses. The subject is based on the banking policy of “privatisation of profits and nationalisation of losses” and it is debated mainly from trade articles point of view. Even when taxpayers do not agree, governments choose either to bailout influential banks or to cover their losses with a deposit insurance. Banks would take advantage of any opportunity to increase earnings, even in the insolvency stage, and thus certain regulations and limitations must be provided to minimize the moral hazard occurred. The most important problem that deepens financial regressions relates to the losses spillover effect on the worldwide economy, and although a perfect global banking model cannot be implemented, the paper suggests regulations which improve the financial systems.
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