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Bank regulation Techniques Financial regulation and supervision within the United Kingdom has a history of being very informal, though this could be argued to be more efficient . Regulation can be seen as "the narrower process of setting rules, both by supervisors and by law" , though it should be noted that regulation should not have the effect of guaranteeing that firms will never fail. The specific purpose of regulation is to "ensure the safety and soundness …

…to be a cultural difficulty as there is the need for regulators to change from rules based regulation to process based supervision. This could create difficulties with different regulators adapting different ideas and principles to what this means. The new approach could also induce credit cycles and have the effect of increasing systemic risk. As if credit quality falls in recession, capital requirements will rise with the effect being that in will induce credit rationing.