The role of regulation and crisis Essay Example | Topics and Well Written Essays - 1000 words

The role of regulation and crisis - Essay ExampleThe subprime crisis was also an outcome of oversight of financial regulatory body as well as the professionals engaged in accounting and auditing process. To slang a better understanding of financial crisis the role of government, regulatory body, accounting system & standards, political surround and capitalism needs an analysis.From 2001, the Lamfalussy framework was introduced in EU system of supervision and regulation. The framework was arranged in four separate levels and promulgated by European council (Great Britain Parliament House of Lords European Union Committee, 2009, p.12). These regulations ar responsible for making the accounting and auditing process more transparent. After the great depression, International Monitory entrepot and World Bank were established to avoid the causes which actually results into depression. But these regulatory bodies are almost 65 years old and are ill equipped to handle the complex banking environment of 21st century. closely all the major economies have their own regulatory bodies, like Financial Services Authority (FSA) of UK and the Securities and change over Commission (SEC) in US, still they failed to check the financial crisis. Even the Basel II Accord agreement that was published in 2004 failed to detect and control credit crunch. Many banks are blaming Mark to Market system for ripening of such a disastrous financial crisis (Rayner, 2008). The financial system is based on the trust and faith, but collapse of Lehman Brothers, Bank of America and PNC Bank Corp are few examples of how the policymakers and regulators failed to maintain peoples faith in them. Most surprisingly Americas financial system failed to manage assay and proper allocation of capital (Stiglitz, 2008).Fair Value Accounting or US Accounting stock FAS 157 is basically used for determining clean value or market value of the assets and the liability. Many critics argued that fair value ac counting is highly