Heritage Education

Learning Banking and Finance Law

Over the years, the global financial sector has weathered many ups and downs – and this does not just refer to the Global Financial Crisis of 2008. In fact, whether it was the English banking collapses of 1866 and 1878, or the Wall Street crash of 1929, a financial institution in crisis appears often to have had many of the same issues in common.

And unfortunately, people who should have known better playing fast and loose with governance makes a star appearance on every highlights reel. This is something that those involved in law assignment writing on the topic, regularly miss.

Protecting and serving

Adequate checks and balances were either not in place or were disregarded in the pursuit of greater profit. The problem is that when this happens, it is not just inanimate organizations that suffer, it is real people who lose livelihoods – and sometimes even their lives. This is why financial sector regulation is such an important component of a functioning and sustainable banking sector globally.

Banks are the backbone of investment financing, they help facilitate not just the operations of a company and/or economy, but also its ability to self-sustain, expand and acquire. Banks ensure that lending is done responsibly and that the risks attached to the people and assets involved are assessed and adequately protected while doing so.

It’s money, no matter what market

What’s more, no matter where the bank or the company is situated, there are certain international regulatory commonalities and requirements that go beyond just the niceties captured in general. We live and work in a global economy and the accountabilities of formal financial institutions are regulated by a core set of standards.

This is the price of doing business beyond your country’s borders. And in markets where banking regulation and the requisite legalities were not well implemented, to begin with, hard lessons
have been learned, including a complete financial sector breakdown – as in the case of Nigeria not so long ago.

That market has seen a sector reset and is much better off for it, Even better, the key players have recognized the importance of finding and retaining skilled regulatory practitioners to support the banking renaissance. A topic which is now a regular mainstay of African banking.

Partnering for sector sustainability

However, whatever the market, in order to ensure that companies and banks understand what is involved in compliance, there must be access to a deep expertise and understanding of banking law. This is why bankers and lawyers are key partners in investment strategy success. Where bank clients are undertaking large-scale investments in projects or assets, the bank must ensure that any lending decision is made in parallel with the priority to protect the client’s money – and thereby the banks return on the money lent.

This is where banking and finance lawyers form the critical link in the process. Whether they are overseeing a merger and acquisition, or just assisting a client in provisioning for a private equity deal, the importance of their ability to understand local regulation and structure financing deals that maximize tax incentives or minimize regulatory risk, cannot be overstated. They are the custodians of the contracting, drawing up documents and helping the bankers decide on how and when to pay over the money to finance a transaction. This is what you need to know when doing law assignment writing in the professional sector.

Keeping it real

So, while the bankers evaluate the risk and ask hard questions around return, it is the lawyers who serve as the checks and balances, securing the position of the bank, the borrower and the asset. It is the banking and finance lawyer who keeps all parties in line with regulation and puts governance first. In a world where capitalism is king – and corruption ever present – the role of banking and finance law has never been more necessary.

Banks and Economics

Banks and other financial institutions hold a lot of sway in the current global economic environment and as a result, take the bulk of the flack when it comes to consumers railing against the man. However, the hat seems to be overlooked is that without banks, we wouldn’t have had the wide-scale global social and economic development that has moved our planet into the civilised world.

Banks are the cornerstone of organised funding, whether it is providing financing for a farmer to pay for his seed and fertiliser ahead of the harvest pay-out, or a contractor to buy the raw materials with which he builds a client’s house.

Without the bank providing bridging finance through a loan, these small businesses would have no way to function. Furthermore, banks grew out of the concept of barter or exchange. While it is simple to swap a pig for your neighbour’s wheat crop, moving that pig 1000 miles to the north to pay for another commodity is a little more difficult.

The development of money

Thus, the development of money – or tokens – ensued. People were able to create a token that represented an intrinsic value of things and utilise it to pay for goods. However, a token was only worth something if there was an institution’ that recognised and backed up its worth i.e. a bank. The need to formalise payment systems through money/coin was also driven by the fact that markets expanded and people wanted access to more opportunities and goods.

There needed to be a common form of compensation for goods that didn’t necessitate a like for like swap, but rather allowed people to pay with a token that represented a value. A token they could cash in’ at a bank should they need to do so. To get a sense of the history of banking to take a look here
https://www.youtube.com/watch?v=fOBTJdDqPDM

Another advantage of banks is that they are required to apply a standardised set of rules and regulations to how they work, how they protect money and how they charge consumers for their services. The basis of modern-day banking is that banks pay customers interest in order to be able to use the customer’s money to fund other activities.

Banks and customers

Banks also charge customers for the privilege of having access to money that isn’t theirs to fund their own initiatives – for example, the farmer of builder mentioned above. The banks’ ability to recoup the cash lent or pay the customer’s interest on what they keep in their account is based on a sound governance structure, informed risk assessment and top-notch security. Well at least, that’s the basics of it.
However, if you want to take a deeper look into what else happens, try this video:

Sadly, in many markets where people are not that financially literate, there continues to be a suspicion towards banks. Financial literacy refers to a person’s ability to understand how money works, how it functions in an economy and how to use that knowledge to make sound financial planning decisions around spending, saving and retirement provisions.

In less financially literate markets, people often fall prey to the plethora of avaricious microlenders who skirt around the requirements of the formalised banking sector. These lenders provide ready cash to unwitting individuals at extortionate interest rates. This means that the borrower, who is usually at breadline salary levels, is often left paying four or five times the amount lent in order to repay the loan.

This is why the formalised sector is so important. The advantage of a bank is that while yes, they certainly charge interest on the money they loan (they are a capitalist construct and they charge for their service), it is usually at sustainable rates and they ensure that the client does not overextend – this is a requirement of governance, something a micro-lender often disregards.

Furthermore, banks are necessary for economies to expand. And for individuals, they are the responsible choice for a fair deal, offering the informed customer a chance to achieve financial inclusion at competitive rates.