How does the government affect financial institutions?

government regulation affects the  financial services  industry in many ways, but the specific impact depends on the nature of the regulation. increased regulation typically means a higher workload for people in financial services, because it takes time and effort to adapt business practices that follow the  new regulations correctly.

while the increased time and workload resulting from government regulation can be detrimental to individual financial or credit services companies in the short term, government regulations can also benefit the financial services industry as a whole in the long term. the  sarbanes-oxley act  was passed by congress in 2002 in response to multiple financial scandals involving large conglomerates such as enron and worldcom. the act held senior management of companies accountable for the accuracy of their  financial statements, while also requiring that internal controls be established at these companies to prevent future fraud and abuse. implementing these regulations was expensive, but the act gave more protection to people investing in financial services, which can increase investor confidence and improve overall corporate investment.

answer; a cost benefit analysis;