Financial regulation is amazingly interesting, I think. And why is it so interesting? Well, because the regulation of the financial services industry impact the entire capitalist system and therefore, the overall economy of the world and individual countries. And therefore, it impacts our daily lives very, very directly. Let's have a look at the case study of historical regulation in the USA. Well, first of all, there's pretty much, already since the 1900s, being, rules surrounding capital adequacy. There's always been rules saying that banks need a minimum amount of equity as a buffer against future losses. Then between 1933 and 1986, we had what was called Regulation Q. And Regulation Q, pretty much regulated interest rates and prices on loans, et cetera, making the banking industry pretty much like a utility. Pretty amazing when you think back on it today. On top of that, there were restrictions on interstate banking in America, all the way to 1994.

This meant there were restrictions of having networks of banks that crossed state borders. However, this was slowly eroded over the years, which soon gave birth to the giant banks of America like, Chase, Citi, and Bank of America. And then we had the Glass Steagall Act. The Glass Steagall Act was implemented in 1933, and it prevented investment banks from taking deposits, effectively, separating normal deposit taking banking from investment banking. It came into force, of course, during the depression, and the aim of the Glass Steagall Act was to prevent depositors from losing money on the back of risky investment banking business. Parallel to this, we saw a number of pure banking regulatory initiatives. The first one was Basel 1. The work on Basel 1 started in 1988, and it was implemented in 1992. The reason for Basel 1 was twofold. First of all, the Basel Committee, headquartered in Basel, Switzerland, wanted to level the playing field internationally to encourage international competition between banks. And it also wanted to increase transparency so that if you did business with a foreign bank, you pretty much knew what you were doing. But Basel 1 was a bit too simplistic. And in 2004, work started on Basel 2, and it was implemented in 2008. The main difference here, was that the risk-weighting calculations for credit was a lot more sophisticated. It allowed for differences in risk in the credit. And on top of that, Basel 2 introduced risk-weighted assets for operational risk, as well as market risk. Basel 2 of course, was implemented by 2008. What happened in 2008? Massive financial, global financial crisis hits, and regulators again, or the Basel Committee saying, hey, we need to upgrade this policy again. So we start work on Basel 3, and we're gonna implement that Basel 3 by 2019. And that's pretty much where we stand right now.