4.6.6 Behaviour of Regulators and the Division of “Narrow Banking” from Investment Banking In the light of the financial crisis, regulators internationally are re-examining the need for the division of the different functions of banking – deposit taking, loan extension and payment servicesprovision–fromthemorecomplexandriskyinvestmentbankingactivitiesorwhether theycanbeundertakenbythesamefirms.Theactualtrendhasclearlybeenforthesefunctions to be combined to a greater extent than ever before – as Bear Stearns has folded into JP Morgan,MerrillLynchintoBankofAmerica,andpartofLehman’sintoBarclays.Inaddition, Morgan Stanley and Goldman Sachs have become bank holding companies with access to the federaldiscountwindow(botharecoveredbytheimplicitassumptionthattheUSgovernment would consider them too important to fail). Regardless of this trend, several commentators have argued that regulation should be designed to produce a separation of “narrow banking” from risky investment bank trading activities, a reimposition of the Glass-Steagall separation of commercial and investment banking. Following the Great Crash of 1929, the US Congress passed the 1933 Glass-Steagall Act which, among other measures, prohibited a bank holding company (a retail bank) from owning other financial institutions – such as investment banks (House of Commons 2009). This provision was repealed in 1999. However, while there is support for divorcing the “utility” functions from the “riskier” investment banking practices, the world of banking has changed and it may no longer be possible to define those activities which can be simply classified as investment banking. Nevertheless there is a rationale for carefullyconsideringhowtoinsulatethevitalfunctionsofretailbankingfromadverseimpacts arising from the potential irrationality of liquid traded markets.
4.6.6 Behaviour of Regulators and the Division of “Narrow Banking” from Investment Banking In the light of the financial crisis, regulators internationally are re-examining the need for the division of the different functions of banking – deposit taking, loan extension and payment servicesprovision–fromthemorecomplexandriskyinvestmentbankingactivitiesorwhether theycanbeundertakenbythesamefirms.Theactualtrendhasclearlybeenforthesefunctions to be combined to a greater extent than ever before – as Bear Stearns has folded into JP Morgan,MerrillLynchintoBankofAmerica,andpartofLehman’sintoBarclays.Inaddition, Morgan Stanley and Goldman Sachs have become bank holding companies with access to the federaldiscountwindow(botharecoveredbytheimplicitassumptionthattheUSgovernment would consider them too important to fail). Regardless of this trend, several commentators have argued that regulation should be designed to produce a separation of “narrow banking” from risky investment bank trading activities, a reimposition of the Glass-Steagall separation of commercial and investment banking. Following the Great Crash of 1929, the US Congress passed the 1933 Glass-Steagall Act which, among other measures, prohibited a bank holding company (a retail bank) from owning other financial institutions – such as investment banks (House of Commons 2009). This provision was repealed in 1999. However, while there is support for divorcing the “utility” functions from the “riskier” investment banking practices, the world of banking has changed and it may no longer be possible to define those activities which can be simply classified as investment banking. Nevertheless there is a rationale for carefullyconsideringhowtoinsulatethevitalfunctionsofretailbankingfromadverseimpacts arising from the potential irrationality of liquid traded markets.
การแปล กรุณารอสักครู่..