<u>Credit regulation is an instrument available to the government to ensure the proper environment for the development of business and the economy and to avoid crises in the credit market.
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Regulation in the credit market can prevent financial institutions from lending more resources than they can afford in the event of default on customers, thus avoiding a credit crisis that can take on greater proportions. That is, financial regulation can have a pedagogical character for financial institutions that take high risks when lending their resources. Regulations may require, for example, that institutions raise borrowing requirements for borrowers.
