Designing a Bank Regulation System for the Former U.S.S.R.: Federalism Issues Under the U.S. Dual Banking System
James W. Weller
While the Soviet Union no longer exists, what will ultimately take its place appears uncertain. At the time of the writing of this paper, a Commonwealth of Independent States, made up of some of the member states of the former Union, had moved to fill this void. But the exact framework in which this Commonwealth is to function remains murky, at best. Previously, the Soviet Union had been groping toward reform of its entire economic system, including banking, currency, and bank regulation, and it is assumed that such reforms may be pursued in the developing Commonwealth. 1 The establishment of a system of banking regulation is the subject of this paper.
In the United States, bank regulation takes place on two levels. Federal authorities regulate banking, while regulatory authority is also concurrently exercised by the individual states. The interplay of regulatory authority, providing what has been termed the dual banking system in the United States, has generated a host of federalism issues.
Banking regulation in the Commonwealth developing in Eastern Europe may be established in an analogous framework. The individual states may regulate banking, while ceding some of their power to a central authority also regulating banking. By focusing on how some of the problems of regulation have been resolved in the United States and the balance that has been struck between federal and state regulatory control, a fuller understanding of the advantages and disadvantages of such a banking regulation system can be analyzed, understood, and dealt with in designing a system for the Commonwealth of Independent states.
This paper will begin with a discussion of how the dual regulatory system operates in the United States, and how it evolved to its present state. Discussion will touch on some of the benefits and drawbacks of the U.S. system. Next,