Banking regulation refers to the set of laws and guidelines that govern how banks operate. These rules are designed to ensure the safety and soundness of the banking system, protect consumers, and maintain public confidence in financial institutions. Regulatory bodies, such as the Federal Reserve in the United States, oversee banks to ensure they follow these rules and manage risks effectively. One key aspect of banking regulation is capital requirements, which dictate how much money banks must hold in reserve. This helps prevent banks from taking excessive risks that could lead to financial crises. By enforcing these regulations, authorities aim to create a stable and trustworthy banking environment for everyone.