Therefore, the more immediate motivations for banking regulation are the protection of the depositors’ interest and maintaining public confidence in the banking system. Banking regulations also aim at building efficiency and resilience of the banking system on the one hand and address the concerns that arise from the functioning of the financial system.
Financial risks are more dynamic than static and assume more intrepid forms with the evolution of the banking functions, products and financial innovation, increased functional integration and decentralisation. Contagion and systemic risk, moral hazard, too big to fail phenomenon, public bailouts of banks are some of the issues that came under sharp scrutiny following the global financial crisis that erupted in 2008.