Explain the capital adequacy requirement

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In a financial industry summit, representatives from different banks are complaining about prudential supervision. They claim that the banking industry is being unfairly and overly regulated, using the example of the capital adequacy regulation which applies only to banks and to no other industries in the economy.

Answer the following questions:

Problem a) explain why the finance industry is the most heavily regulated.

Problem b) Explain the capital adequacy requirement. Describe how capital adequacy regulation of banks is important in maintaining depositor confidence and ensuring the stability of the financial system?

Reference no: EM132750490

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