Regulation And Financial Stability: Truth or Myth?

This paper explores the regulation of the financial sector, with particular emphasis on the banking industry. It tries to evaluate existing regulation policies, their effect on economic activity and their effectiveness in keeping the sanctity of the financial sector. It gives an overview of its basis and changes through time and some of its inherent problems. It also looked through previous works, at the effectiveness of regulation on financial stability. The Canadian Financial sector was used as a case study following its apparent resilience to the 2007/08 financial crisis that rocked the world. Being an industrialized country and a member of the G10, this has caused a lot of interest in the regulatory structure and practice of the country with a view to testing its adaptability to different countries. It then concludes on whether regulation really did play a pivotal role in the resilience or it was based on other conditions and circumstances.