Although many sectors have emerged from the global recession, it appears that the financial sector and its exchange traded funds (ETFs) still have an uphill battle to fight.

Gary Gordon of the ETF Expert states that the sector still remains weak because of the ongoing issues with the credit crisis, toxic assets, TARP, residential and commercial real estate defaults, foreclosures and subprime, just to name a few. (More on the challenges faced by financials).

Banks continue to fail in record numbers.  To prevent this from happening again, regulators are pushing for tougher changes in U.S. financial regulations, as the Senate’s top banking legislator on Tuesday proposed a new super-cop to police banks, a systemic risk agency and strong consumer protections, reports Kevin Drawbaugh of Reuters. At the end of the day, this new policy would create a single bank regulator and eliminate two. (More on financials).

Only time will tell if the proposed regulation passes and the sector benefits, but as of now, some think financials are weak.  The SPDR Select Sector Fund Financial (NYSEArca: XLF) is up 19.4%  year-to-date.

If you’re itching to play in the sector, mind the trend lines and have your strategy in place in case hiccups hit the funds. (How to follow trends).

For more stories on financials, visit our financial category.

Kevin Grewal contributed to this article.

Tags: ETF Book, Financial, Sector ETFs, XLF