Regulators, bankers still disagree over how to proceed with regulation

180px-National_Bank_OamaruWhile five years have passed since the financial crisis, bankers and regulators are still at odds over how to proceed with regulation of the financial industry and the future of banking.

Some banks have made progress in reducing their debt, though exposure of the global economy to the financial sector still remains high at approximately 60 percent of global economic output, thereby increasing the importance of banking to the world economy, partly because many banks have moved away from traditional banking activities in favor of capital markets, Seeking Alpha reports.

Banks across the globe faced economic downturn and potential failure after credit markets came to a halt in 2007, forcing many governments to enact controversial bailouts. While many banks have improved their loan-to-deposit ratios, deposits are limited.

Regulators must ensure that new rules are well-planned and cautious to reduce the risk of over-regulation. Without investor confidence in the financial industry and economy, the U.S. recovery is likely to grind to a halt, and regulation will remain the hot-button topic. Confidence in the economy encourages banks to lend and businesses to grow. Stock markets, which have returned to pre-crisis levels, will need assurance from regulators that financial institutions plan to prevent a repeat of the last economic crisis, according to Seeking Alpha.

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