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# Bank Regulatory Framework

## Definition

The system of rules, practices, and market forces that govern banking operations to ensure stability while allowing sufficient freedom for efficient service provision. This framework must balance competing objectives of stability and efficiency.

## Source Chapter

Book II, Chapter 2

## Context

Smith analyses the appropriate regulatory framework for banking, arguing for minimal formal regulation supplemented by market discipline. He shows how this framework can maintain stability while allowing banks to serve economic needs effectively.

## Economic Domain

Regulation

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