Banking regulation and supervision refers to a form of financial regulation which subjects banks to certain requirements, restrictions and guidelines, enforced by a financial regulatory authority generally referred to as banking supervisor, with semantic variations across jurisdictions. By and large, banking regulation and supervision aims at ensuring that banks are safe and sound and at fostering market transparency between banks and the individuals and corporations with whom they conduct business. Its main component is prudential regulation and supervision whose aim is to ensure that banks are viable and resilient ("safe and sound") so as to reduce the likelihood and impact of bank failures that may trigger systemic risk. Prudential regulation and supervision requires banks to control risks and hold adequate capital as defined by capital requirements, liquidity requirements, the imposition of concentration risk (or large exposures) limits, and related reporting and public disclosure requirements and supervisory controls and processes.[1] Other components include supervision aimed at enforcing consumer protection, sometimes also referred to as conduct-of-business (or simply "conduct") regulation and supervision of banks, and anti-money laundering supervision that aims to ensure banks implement the applicable AML/CFT framework. Deposit insurance and resolution authority are also parts of the banking regulatory and supervisory framework. Bank (prudential) supervision is a form of "micro prudential" policy to the extent it applies to individual credit institutions, as opposed to macroprudential regulation whose intent is to consider the financial system as a whole.

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Corporate governance

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Corporate governance requirements are intended to encourage the bank to be well managed, and is an indirect way of achieving other objectives. As many banks are relatively large, and with many divisions, it is important for management to maintain a close watch on all operations. Investors and clients will often hold higher management accountable for missteps, as these individuals are expected to be aware of all activities of the institution. Some of these requirements may include:

• to be a body corporate (i.e. not an individual, a partnership, trust or other unincorporated entity)

• to be incorporated locally, and/or to be incorporated under as a particular type of body corporate, rather than being incorporated in a foreign jurisdiction

• to have a minimum number of directors

• to have an organizational structure that includes various offices and officers, e.g. corporate secretary, treasurer/CFO, auditor, Asset Liability Management Committee, Privacy Officer, Compliance Officer etc. Also the officers for those offices may need to be approved persons, or from an approved class of persons

• to have a constitution or articles of association that is approved, or contains or does not contain particular clauses, e.g. clauses that enable directors to act other than in the best interests of the company (e.g. in the interests of a parent company) may not be allowed.