Analyze the domestic financial industry along with the existing government/legal regulations and determine if more or less regulation is necessary. Specify what changes should be developed. How will the changed regulations affect the current financial environment, and are they feasible in the local legal/political environment?
The study of the report is based on the two major elements, which are the financial sector of United States and the existing government rules and regulation of the nation. These two factors have been well – analyzed within the study in the desired section as per the requirement. The requirement of the report has been satisfied by the extracted knowledge from these elements (Williams & Williams, 2009). The report has been structured in a professional manner, which will enable the reader to analyze the domestic financial industry along with the existing government/ legal regulations of United States. Moreover, the study of the report has enabled the learner to gain knowledge regarding the changes that should be developed within the existing government/ legal regulations of United States. The effect that these changed regulations will have on the current financial environment of United States has been highlighted within the report as well (Rajola, 2013). Furthermore, the report includes a certain division, which will enable the reader to understand the appropriate implementation process of these changes. Therefore, the report can be described as a detailed study that will shed immense light on the financial sector and legal regulations of United States.
The banking sector covers the majority of the financial sector of any nation and the same is applicable for United States as well. The bank regulation of United States is highly fragmented than the other G10 countries. The banking is regulated at both state and federal level in United States, but most of the countries have only one bank regulator. United Kingdom and Japan has a system where regulatory authority over the insurance, banking and securities industries is combined into one single financial service agency (Cleland & King, 2009). This practice and procedure has various negative as well as positive impacts on the entire financial sector of these countries. However, the procedure and practice is gigantically different in the United States, as the nation maintains separate insurance, securities and commodities regulatory agencies. These agencies are also separate form the bank regulatory agencies at the state and federal level of the nation (Chorafas, 2010). The banking regulation of United States promotes the lending to the lower- income populations, which have developed the per capita income of the nation. This determines that the regulations of the country is directed in the right directions as increasing the income of the people within an economy is one of the most massively important (Dymarsky, 2011). The importance of this section increases even more as the growth of the entire economy majorly depends on the increase of the per capita income of the country. Apart from the banking sector, the finance industry also consists of various other elements, which includes alternative investment, capital markets, commercial real estate, annuity, life insurance and mutual funds. These sections also have various regulators, which imply various rules and regulations regarding the business process (Foley & Guillemette, 2010). The insurance and finance sector are primarily engaged with various financial transactions.
The finance industry of the United States comprises of only 10 % of the total non – farm business profits in 1947, which grew to 50 % by the year 2010 (Hg.org, 2015). This highlights the fact that the percentage has grown by 40 % within a span of 63 years. This also highlights the massive increase in the profit ratios of the country, which is one of the major elements for the development of an economy (Hg.org, 2015). Moreover, within this span of 63 years the Gross Domestic Product (GDP) rose from 2.5 % to 7.5 %, which also highlights the massive development of the financial sector of United States (Hg.org, 2015). Meanwhile, various studies also highlight the fact that finance industry’s proportion of all corporate income rose by 10%. The United States finance industry’s proportion of all corporate income has shown a huge development within this span of time. In the recent era, United States is one of the most developed nations within the whole world, which is due to the massive productivity of the nation’s finance industry (Sametz, 2010). The economy of United States has also shown various tendencies to develop even more in the near future. This statement can be supported by the evaluation of the fact that the financial markets of the United States are the largest within the whole world. The evaluation of various surveys shows that in the year of 2012, the insurance and finance industry represented 7.9 % ($ 1.24 trillion) of the total gross domestic product of United States. These also provided a massive financial boost to the economical standard of the nation (Pfeifer & Scheier, 2009). The United State’s agricultural products and manufactured goods also gains huge financial help regarding the export of these goods. The year of 2011 was massively successful for the finance sector of United States as the nation exported a gigantic amount of $92.5 billion in financial services and had a surplus of $ 23.0 billion in insurance trade and financial services. These sectors altogether employed around 5.87 million people in the year of 2012. Furthermore, these sectors of the nation also have shown a massive tendency to increase business in the upcoming years, which will increase the employment rate of these sectors by 12 % at the end of 2018. The U.S department of labour stated that the investment and securities sector of the nation employed 818,000 people at the end of 2012.
The financial firms get exposure to various significant advantages by investing in the U.S financial service industry (Philippon & Reshef, 2009). One of the surveys highlighted the fact that in the year of 2012, at least 132 of Fortune’s Global 500 companies have decided to establish their headquarters in the United States. The companies have taken this decision in order to take advantage of the comprehensive, competitive and creative financial services this sector. The industry of the United States in the recent era has offered the best financial products, which help its consumers massively to balance or satisfy their financial needs within affordable conditions (Liebowitz, 2011).
The government of the United States has various implemented laws within the sector of financial markets of the nation. These rules and regulations have helped the whole sector to run on its business in a systematic manner. The whole finance industry of United States consists of various laws and regulations among which the banking section is covered with various banking laws. These laws are applicable only for the banking sectors of the country, which consists of various domestic and international banks (Smith, 2011). The bank that operates its business in the economy of United States has to comply with a vast number of regulations. This makes the directors and officers of the banks seek legal counsel before making any sort of important decisions. These personnel are bound with this practice as any complain regarding the legal section can accuse the firm of approving illegal activities. This will make the personnel as well as the bank suffer to a massive extent (Scott & Martin, 2015). The Dodd – Frank Act contains more than 1500 separate provisions, which is a banking reform measured passed by the federal government in 2010. Moreover, Dodd – Frank Act also contains nearly 400 rule mandates, which adds up to the long list of regulations. The Federal Reserve System (“the FED”), Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), may regulate the banking institutions in United States (Miller, 2010). Therefore, it can be said that the banking sector of the United States has various rules and regulations to deal with during its business process.
The current regulatory environment of the United States leaves the banks with no other choice rather than making compliance a priority. This has a huge chance to involve a labour – intensive and expensive process, which will affect every individual within the organization. Moreover, the government of the nation has implanted various laws within the industry in order to maintain a peace among the fund transaction process. In the recent past, implementation of this rules and regulations have smoothened the transaction process of various banks operating in United States. Meanwhile, the study of various articles and monitoring of various recent survey results also highlights the fact that the banking sector of United States has faced various dishonesty and fraud issues over the last few years (Michel, 2011). However, the financial industry of the nation has flourished in a massive manner in the recent time, but this has also withheld the growth in the mean time. Therefore, it can be commented that the government of United States needs to implement strategies that cover up the practice of fraud within the various sections of the financial industry.
The study have already concluded that the finance industry of United States has grown in a rapid manner over the last decade but however various arguments have raised regarding the increase in the fraud and dishonesty in these sections. The detection of the fraud within the finance sector of United States is of utmost importance for the nation to develop further. The reasons for increasing the regulations within the country have been stated below:
Maintain the current growth – The nation have experienced a massive growth in the recent time as per the statistic of growth in the financial sector. However, the nation needs to maintain the current rate of growth, which will enable the government to increase the GDP of the country (Neill, 2011). The detection of fraud is of utmost importance as the fraud people of the nation consume a huge amount of fund, which could have increased the per capita income.
Increase the growth rate in the near future – The Gross Domestic Product (GDP) of United States rose from 2.5 % to 7.5 %, which certainly highlights that the nation have developed massively in the financial section. Therefore, the practice of fraud that has increased within the various financial organizations of the nation needs to be controlled in order to maintain in these rapid growth.
Attract foreign direct investment – The foreign direct investment (FDI) is one of the major elements that have the ability to boost up the financial crisis of any country. Therefore, the attraction of these FDIs can be achieved by increasing the market reputation and business opportunity of the nation (Gilad & Gilad, 2013). This can only be achieved by lowering the amount of fraud within the financial sectors of the country.
The finance sector of United States could have achieved even higher milestones if there would have been a decrease in fraud and dishonesty. However, there are various rules and regulations to decrease the amount of fraud and dishonesty within the finance sector, but still the government has failed to decrease fraud. This certainly highlights that the rules and regulations implanted by the government of United States has various loopholes, which needs to be resolved at its earliest. Therefore, the government needs to develop updated rules and regulations that will cover up the existing loopholes (Freeman, 2012). The first and foremost task of the government of United States needs to analyze and locate the exact section, which is having the maximum number of frauds. This will give the government a certain idea regarding the actual reason and tendency of the frauds. The next and final steps should be to make the people aware of the various dangerous circumstances of fraud dealings. The last and the final step should be to build up a new law, which will be effective enough to detect and punish the individuals who are linked with the various fraud processes within the financial industry of the nation (Loshin, 2013). Moreover, the following of the regulatory agenda model will help the country in a massive manner as well, which is highlighted below:
Figure 1: Regulatory Agenda
(Source: Michalewicz, 2009)
The change in the regulations of United States will enable the country to make the current financial environment even smoother than before. The implementation of the new laws and regulations will enable the government to detect the individuals those are related with the fraud activities within the financial sectors. Moreover, the implementation of new laws and regulations will also create certain awareness within the individuals (Michalewicz, 2009). This element of fear will make the fraud makers think various times before committing fraud activities as the chance of detection will increase by a massive level. Therefore, the implementation of these regulations within the current financial environment of United States will make the nation get rid of fraud activities. Therefore, this will increase the cash flow of all the various financial organizations within the sector.
The political sector of United States is quiet constructive and well – maintained, which brings us to the fact that the implementation of the new rules and regulations will be encouraged by the political environment of the country. Therefore, it can be stated that the government will not have any massive difficulty in proposing the new rules and regulations.
The industrial sector of United States needs more development as nations like China; Britain has developed their industrial sector to a massive extent. The government of United States needs to modify this section at its earliest, which will help the growth of the nation (Bottiglia, Gualandri & Mazzocco, 2010). The detection of fraud is simply the detection of black money that does not belong to those people in a legal manner. The detection will also help the nation to utilize this fund in various other divisions of the country, which needs improvement.
The study of the entire report highlights the fact that United States has grown in a gigantic amount in the last few decades. The reason behind this massive success is majorly the financial section of the economy, which has represented 7.9 % ($ 1.24 trillion) of the total gross domestic product. However, the country could have achieved more milestones, which was cut – down by the rise in the fraud activities in the nation’s economy.
The first and foremost recommendation is the developing of some new rules and regulations, which has the ability to detect any sort of fraud activities within the financial sector of the country. The second duty of the government is to monitor the decrease rate in the fraud activities after the implementation of the new rules and regulations. The implementation of all these activities and regulations will help the government to support the financial sector of the nation in a massive manner.
Reference List
Books
Williams, S., & Williams, N. (2009). The profit impact of business intelligence. Amsterdam: Elsevier/Morgan Kaufmann
Rajola, F. (2013). Fraud management in the financial industry. Berlin: Springer
Sametz, A. (2010). The Emerging financial industry. Lexington, Mass.: LexingtonBooks
Pfeifer, R., & Scheier, C. (2009). Understanding business intelligence. Cambridge, Mass.: MIT Press.
Philippon, T., & Reshef, A. (2009). Financial condition of the U.S. financial industry. Cambridge, Mass.: National Bureau of Economic Research
Liebowitz, J. (2011). Strategic intelligence. Boca Raton, FL: Auerbach Publications
Loshin, D. (2013). Business intelligence. Amsterdam: Morgan Kaufmann Publishers
Michalewicz, Z. (2009). Adaptive business intelligence. Berlin: Springer
Bottiglia, R., Gualandri, E., & Mazzocco, G. (2010). Consolidation in the European financial industry. Houndmills, Basingstoke: Palgrave Macmillan.
Chorafas, D. (2010). New regulation of the financial industry. Houndmills, Basingstoke, Hampshire, London: Macmillan Press.
Journals
Cleland, D., & King, W. (2009). Competitive business intelligence systems. Business Horizons, 18(6), 19-28.
Dymarsky, I. (2011). Business Intelligence. International Journal Of Business Intelligence Research, 2(2), 22-36.
Foley, A., & Guillemette, M. (2010). What is Business Intelligence?. International Journal Of Business Intelligence Research, 1(4), 1-28.
Freeman, O. (2012). Competitor intelligence: information or intelligence?. Business Information Review, 16(2), 71-77.
Gilad, B., & Gilad, T. (2013). A systems approach to business intelligence. Business Horizons, 28(5), 65-70.
Michel, A. (2011). Industry Influence on government rules and regulations. Financial Management, 8(3), 22.
Miller, D. (2010). Improving Business Intelligence. International Journal Of Business Intelligence Research, 1(4), 47-62.
Neill, D. (2011). Business Intelligence Competency. International Journal Of Business Intelligence Research, 2(3), 21-35.
Scott, D., & Martin, J. (2015). Industry Influence on Financial Structure. Financial Management, 4(1), 67
Smith, J. (2011). How regulations affect the current financial system. Business Information Review, 1(4), 11-22.
Website
Hg.org,. (2015). Banking Law – Guide to Bank Regulation Law – HG.org. Retrieved 2 July 2015, from https://www.hg.org/banking.html
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