Academic journal article ABA Banking Journal

A Full Plate

Academic journal article ABA Banking Journal

A Full Plate

Article excerpt

For months we've planned this to be our "new millennium" issue--one that would be forward-looking, rather than a review of the 20th Century. Obviously we didn't know then if banking would have a financial modernization law this year, but we figured the chances were close to even. When the congressional compromise that led to S. 900 was reached in the wee hours of Oct. 22, we knew we had a major new element for this issue.

There is no need to recount here the immense sweep and many ramifications of the new law, unhandily named The Gramm-Leach-Bliley Act. It is covered in our special Briefing section, beginning on page 6.

Executive Editor Steve Cocheo, who has been covering Washington for us for 20 years, gives a thoughtful introduction to the landmark legislation in Briefing, calling it "a measure of change that will be far more sobering than a potfull of coffee on Jan. 1." Sobering and pretty exciting, too.

Important as it obviously is, the new law is hardly the only significant issue facing bankers as they head into 2000. Also in this issue (p. 68) is the first part of a two-part look at the new risk capital rules proposed last June by the Basel Committee on Banking Supervision. The original risk-based rules were established in 1988 by the same group.

Contributing Editor Ed Blount, who also has 20 years experience in the banking and securities business, explains how market developments--securitization in particular--have created imbalances and additional risk in the banking system under the old rules. The issue is worthy of all bankers' careful attention because it brings to the fore questions of how best to supervise financial institutions in a rapidly changing environment. The effects of technology in particular have put strains on the old structure and rules. The passage of S. 900 places even greater importance on this issue.

Internet hoopla may be overshadowed temporarily (in banking circles) by the new law. But not for long. Indeed, there are some who would say the reverse is true: that the changes being wrought by the Internet easily overshadow any changes Congress can make. Debates over relative rankings are pointless, however. Both developments are real, here now, and critical to the future of banking.

A special report on electronic commerce in this issue explores several technology issues. …

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