ABSTRACT
This chapter provides an overview of the banking system in the context of financial markets. It examines the legal definition of credit institutions in EU law; the main types of banks, including virtual banks; and the intermediary function of banks. Furthermore, the chapter explains why banking regulation is necessary, and distinguishes between conduct of business regulation and prudential regulation. The chapter concludes with a broad assessment of recent and current regulatory trends in the financial markets which canvasses the key challenges facing banking regulators and supervisors in the UK and the EU.
