Deregulation lowers or removes restrictions in a particular industry, giving market forces greater influence over outcomes.
In financial markets, it typically relaxes rules on banking, trading, and investment to encourage competition, innovation, and efficiency.
Its impact depends on the balance between market freedom and regulatory safeguards, a debate that continues to shape global financial policy.
An example of deregulation in the financial markets:
The Regulation:
The Banking Act of 1933, known as Glass-Steagall, established a clear division between different sectors of the financial services industry. These restrictions were introduced amid concerns that the close integration of commercial and investment banking had contributed to the 1929 stock market crash.
The Deregulation:
The Financial Services Modernisation Act of 1999, also known as the Gramm-Leach-Bliley Act (GLBA), was signed into law by US President Bill Clinton. It dismantled key provisions of Glass-Steagall, which had enforced a strict separation between commercial and investment banking since 1933. The legislation enabled the rise of financial holding companies, allowing banks, insurers, and securities firms to affiliate with one another.