Question

You are a group of MBA students at a prestigious university in the Caribbean and you are in the final semester in your programme. As part of the requirement of completing the studies you are required to complete a project.

The project requires that you:

1. Undertake a research carrying your own fact-finding and analysis;

2. Perform a critical analysis of the Eastern Caribban Central Bank system of banking regulation ans superviion in the Caribbean in comparison to the Federal Reserve System of Bank Regulation and Supervision in the US Territory in terms of Regulations, Guidelines and Penalties.

4. Write a report in 1000 words corporating your research, fact finding and analysis about the system in the US territory

Answer 1

The fact-finding report can be structured in the following ways.

Introduction

Various national governments are trying to prevent failures mainly for protecting the interest of investors as it is very important for the well-being of a financial system of a country. Normally banks are doing it with the assistance of central banks of the respective nations. In fact, central banks are strictly regulating the financial system by exercising close supervision and control. A central bank will be the apex monetary institution in a country that regulates the money supply, interest rates, etc. Bank regulation means a set of written rules that determine the conduct for financial institutions in a nation. Here in this report, we are going to analyze the banking regulation and supervision system of two important central banks in the world such as the Federal Reserve, USA, and Eastern Caribbean Central Bank.

Federal Reserve, USA

The Federal Reserve is the central bank of the United States of America that was incorporated in December 2013 that controls the monetary and financial system of the United States. The Federal Reserve of USA is headquartered at Washington, D.C., USA. The Federal Reserve System (FRS), is popularly known as the Fed, it handles the nation's monetary policy and regulates banks.

Eastern Caribbean Central Bank

Eastern Caribbean Central Bank is the central bank or monetary authority of the Organisation of Eastern Caribbean States' member countries who were formerly colonies of the United Kingdom. It acts as the agent for the safeguarding of the banking system of Eastern Caribbean Economic and Currency Union. Eastern Caribbean Central Bank was incorporated in October 1983. It facilitates the balanced growth and development of member countries of the Organization of Eastern Caribbean States. Eastern Caribbean Central Bank is headquartered at Basseterre, St. Kitts.

Specialties of Eastern Caribbean Central Bank system of banking regulation and Supervision

• The major function of the Eastern Caribbean Central Bank system is to regulate the availability of money and the free flow of credit among member countries.
• Eastern Caribbean Automated Clearing House (ECACH) is facilitating the transfer of cash among various banks in the country. The bank started it by associating with the Eastern Caribbean Currency Union (ECCU).
• Central Monetary Authority is the body under the Eastern Caribbean Central Bank that decides on the monetary policy of the bank.
• Before 1983 licensing, supervision and regulation of banks were performed by the ministries of finance of member countries of Organisation of Eastern Caribbean States. But it changed by the establishment of the Banking Supervision Department in the year 1983.

Specialties of the Federal Reserve System of Bank Regulation and Supervision

• The key function of the Federal Reserve System is to handle a country's monetary policy and regulating banks.
• The Federal Reserve payments system called the Fedwire facilitates the transfer of trillions of dollars daily among banks of the country.
• The Federal Open Market Committee (FOMC) is the monetary policy-making body of the Federal Reserve System that manages money supply in the country.
• From the inception onwards licensing, supervision and regulation of banks were performed by Federal Reserve itself.

Comparison of both of the banking systems

• The key function of the Federal Reserve System and Easterns Caribbean Central Bank system is to s to regulate the availability of money and the free flow of credit through monetary policy and regulating banks.
• Both Federal Reserve and Easterns Caribbean Central Bank have their own unique system for the transfer of cash among various banks.
• Both the Federal Reserve and Easterns Caribbean Central Bank have unique bodies for the management of money supply in a country.
• Currently, both Federal Reserve and Easterns Caribbean Central Bank have the right to licensing, supervision and regulation of banks.

Conclusion

Both Federal Reserve, USA and Easterns Caribbean Central Bank have a similar system to control and regulate banks, monetary policy, transfer of cash, etc. Licensing, supervision, and regulation in East Caribbean countries were performed by the ministries of finance of member countries of the Organisation of Eastern Caribbean States.but it adopted a similar system of Federal Reserve from the inception of Banking Supervision Department in the year 1983.