Solvency Regulation

Solvency regulation involves rules that ensure financial institutions, like banks and insurance companies, have enough assets to cover their liabilities and risks. These regulations require companies to maintain certain financial buffers — called capital — so they can meet their obligations even during economic stress. The goal is to protect consumers, maintain financial stability, and prevent insolvency, which could lead to failures or crises. Essentially, solvency regulation makes sure that these institutions are financially sound and capable of fulfilling their commitments, supporting trust and stability in the financial system.