About: Prudential regulation

Prudential regulation is a type of financial regulation that requires financial firms to control risks and hold adequate capital as defined by capital requirements, liquidity requirements, by the imposition of concentration risk (or large exposures) limits, and by related reporting and public disclosure requirements and supervisory controls and processes. Prudential regulation can be split into microprudential regulation that focuses on the individual firms and making sure that they can withstand shocks and macroprudential regulation that looks at the whole financial system and systemic risk.