Government oversight is important in the financial services industry. Various types of financial services are regulated and licensed. Government agencies vary in their level of oversight, with the United States having a number of agencies regulating them. In the United Kingdom, the Financial Services Authority is responsible for the regulation of financial services. Read on to learn more about government oversight in the financial services industry. The purpose of government oversight in the financial services industry is to protect consumers and ensure that financial services companies perform their functions legally.
Financial services industry
Since the collapse of Enron in 2001, the Financial Services industry has undergone a number of crises. Some of the biggest were Black Monday, the dot-com bubble, and the subprime mortgage crisis in 2007-2009. Fortunately, the advent of new technology has made these industries more customer-oriented and competitive. Still, it is crucial for regulators to make their rules and regulations foolproof if the Financial Services industry is to remain healthy.
Types of financial services companies
The financial industry comprises a variety of business types, including investment and brokerage houses, banks and insurance firms, credit and payment processing companies, real estate firms, and credit cards. These companies all work within the financial sector, and are often referred to as “financial services” companies. Berkshire Hathaway, for example, is one of the oldest financial services companies in the United States. Today, the company focuses on credit card offerings and co-branded cards with hotels.
Functions of financial services companies
The functions of financial services companies are many, and a brief overview is provided here. Financial services facilitate the exchange of goods and services, mobilize capital funds, monitor managers, and transform risk. Most financial services firms are customer-oriented, studying needs and market conditions before deciding on the appropriate financial strategy. They also take into account costs and liquidity, and stay in touch with customers and their maturities and growth. But there are some important differences between financial services companies and banks.
Regulation of financial services companies
The federal government has been enforcing regulations on financial services companies since the Great Recession. The financial crisis caused millions of Americans to lose their homes, and it threw a spotlight on the deceptive practices of subprime mortgage lenders. The government has now taken steps to regulate the financial services industry, which are essential for consumers to understand the costs, risks, and benefits of various financial products. Here are some of these rules:
Impact of digital transformation on financial services industry
To succeed in the digital age, financial services organizations need to adopt a new culture of failure and continuous learning. This can be accomplished by establishing a cross-functional “Digital Dream Team.” More than three-fourths of financial services executives and 57 percent of non-financial companies have already established a digital innovation steering committee. They also have hired board members and senior management with relevant oversight skills.