Governing Banking’s Future

Markets vs. Regulation

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About the Book

Our half century experiment with a legal apparatus that attempts to specify individual financial institutions’ products and geographic markets has proven to be a failure. Many industry observers have blamed that regulatory structure for U.S. banks’ increased credit risks and loan write‐​offs, their reduced profitability, their difficulty in attracting capital, and their falling share of world financial markets. The U.S. regulatory framework needs to be reconciled with evolving competitive practices.

One way of doing that is to allow domestic and international markets to play a greater part in determining the role of banks. In Governing Banking’s Future, bankers and financial scholars address the major concerns raised by the prospect of such a change: Could banks, with their federally protected deposits, be insulated by a holding‐​company structure from their nonbank parents and other affiliates? Would allowing a broader range of companies to own banks or be affiliated with banks introduce additional, unacceptable risk into the payment system?

The authors also examine the forces that led to the recent efforts to establish internationally coordinated regulatory standards and discuss both the feasibility of subjecting banks in different countries to similar standards and the desirability of doing so. Published by Kluwer Academic Publishers.

This book contains the papers presented at a Cato Institute conference on November 2, 1988.

About the Editor

Catherine England is visiting assistant professor at the Institute of Graduate and Professional Business Studies, George Mason University and an adjunct scholar at the Cato Institute.