Universal Banking in the United States: What Could We Gain? What Could We Lose?

Universal Banking in the United States: What Could We Gain? What Could We Lose?

Universal Banking in the United States: What Could We Gain? What Could We Lose?

Universal Banking in the United States: What Could We Gain? What Could We Lose?

Synopsis

In 1933 and 1956, the United States sharply limited the kinds of securities, commercial, and insurance activities banks could engage in. These regulations remain in place despite profound changes in the economic environment, in the structure of the national and international financial markets, and in technology. This book evaluates the case for and against eliminating these barriers. The authors study the consequences of bank regulation in the US as it relates to competition in international financial markets. They examine universal banking systems in other countries, especially Germany, Switzerland, and the UK, and how they work. They then apply the lessons to US banking, paying particular attention to the benchmarks of stability, equity, efficiency, and competitiveness against which the performance of national financial systems should be measured. They propose a level playing field on which any number of forms of organization can grow in the financial services sector, in which universal banking is one of the permitted structures, and where regulation is linked to function.

Excerpt

Few topics in economics and finance have been as hotly debated as the "optimum" structure and regulation of the banking system. The objective is always the same: maximum static and dynamic efficiency within a politically and economically tolerable framework of stability and equity. Gains in efficiency often come at a cost in terms of stability and equity. More stable and equitable financial systems often require sacrifices in terms of efficiency. Coupled to these basically national considerations is global competitiveness -- of the national financial services industry and of the national economy more generally. The four benchmarks against which the ultimate performance of national financial systems must invariably be measured are stability, equity, efficiency, and competitiveness.

Financial services as an industry has become one of the most rapidly changing sectors of the global economy, with massive shifts in information transmission and processing, financial innovation in products and processes, and intense competition among institutions -- and between them and many of their clients. As the industry and its role in the economy changes, it stands to reason that the regulatory structure ought to be reexamined periodically as well. In the United States, major pieces of the regulatory structure -- such as the McFadden Act and Glass-Steagall Actwere put in place some six decades ago, and despite the dramatic reconfiguration of the financial intermediation process little change has occurred in the legislative overlay. Decades of political lethargy, coupled with powerful vested interests capable of suppressing national welfare considerations, has left it to the regulators and the courts to bend the regulatory . . .

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.