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Separation of Commercial and Investment Banking

1990-06-18 Business & Economics
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Release : 1990-06-18
Genre : Business & Economics
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Book Rating : 801/5 ( reviews)

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Book Synopsis Separation of Commercial and Investment Banking by : George J. Benston

Download or read book Separation of Commercial and Investment Banking written by George J. Benston. This book was released on 1990-06-18. Available in PDF, EPUB and Kindle. Book excerpt: The latest in a series of studies in banking and international finance. This book deals with all aspects of the Glass-Steagall Act, and the relationship between the commercial banks and the investment banks.

Separation of Investment Banking and Commercial Banking

2016
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Release : 2016
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Book Synopsis Separation of Investment Banking and Commercial Banking by : John MacCarthy

Download or read book Separation of Investment Banking and Commercial Banking written by John MacCarthy. This book was released on 2016. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this paper is to critically examine existing literature on separation of commercial banking activities from investment banking activities in order to advise whether the commercial and investment banking activities should be combined or separated. Introduction of new regulation in the wake of global financial crisis bring with it additional operating cost to operators of the financial sectors. While supervising plethora of regulations by central banks becomes difficulty and in the end nothing is achieve from it. The paper identified the causes of the global financial crisis that commenced in the mid-2007 as a result of global financial imbalance; long period of low interest rates in the advanced economies; consumer failure to monitor for themselves; managers compensation schemes encouraged risk-taking; skewed incentives of the rating agencies and finally, the limitation of risk measurement and regulation. These reasons contributed to the global financial crises and not the repealed Glass-Steagall Act. The study concluded that the repealed of the Act did not cause the global financial crisis in 2007 but was rather due to inadequate supervision by the regulators. The study adopts content analysis to assess the risks associated with combining the two operations together and those who posit that the combination should be separated and those in favour of it. The study professed some recommendations that will protect public interest and private capital while carrying out combined operations of commercial banking and investment banking activities.

To Separate Or Not to Separate Investment from Commercial Banking? An Empirical Analysis of Attention Distortion Under Multiple Tasks

2017
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Release : 2017
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Book Synopsis To Separate Or Not to Separate Investment from Commercial Banking? An Empirical Analysis of Attention Distortion Under Multiple Tasks by : Reint Gropp

Download or read book To Separate Or Not to Separate Investment from Commercial Banking? An Empirical Analysis of Attention Distortion Under Multiple Tasks written by Reint Gropp. This book was released on 2017. Available in PDF, EPUB and Kindle. Book excerpt: In the wake of the 2008/2009 financial crisis, a number of policy reports (Vickers, Liikanen, Volcker) proposed to separate investment banking from commercial banking to increase financial stability. This paper empirically examines one theoretical justification for these proposals, namely attention distortion under multiple tasks as in Holmstrom and Milgrom (1991). Universal banks can be viewed as combining two different tasks (investment banking and commercial banking) in the same organization. We estimate pay-performance sensitivities for different segments within universal banks and for pure investment and commercial banks. We show that the pay-performance sensitivity is higher in investment banking than in commercial banking, no matter whether it is organized as part of a universal bank or in a separate institution. Next, the paper shows that relative pay-performance sensitivities of investment and commercial banking are negatively related to the quality of the loan portfolio in universal banks. Depending on the specification, we obtain a reduction in problem loans when investment banking is removed from commercial banks of up to 12 percent. We interpret the evidence to imply that the higher pay-performance sensitivity in investment banking directs the attention of managers away from commercial banking within universal banks, consistent with Holmstrom and Milgrom (1991). Separation of investment banking and commercial banking may indeed be associated with a reduction in risk in commercial banking.

Making Banks Safer

2011-10-01 Business & Economics
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Release : 2011-10-01
Genre : Business & Economics
Kind : eBook
Book Rating : 027/5 ( reviews)

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Book Synopsis Making Banks Safer by : Mr.Julian T. S. Chow

Download or read book Making Banks Safer written by Mr.Julian T. S. Chow. This book was released on 2011-10-01. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses proposals to redefine the scope of activities of systemically important financial institutions. Alongside reform of prudential regulation and oversight, these have been offered as solutions to the too-important-to-fail problem. It is argued that while the more radical of these proposals such as narrow utility banking do not adequately address key policy objectives, two concrete policy measures - the Volcker Rule in the United States and retail ring-fencing in the United Kingdom - are more promising while still entailing significant implementation challenges. A risk factor common to all the measures is the potential for activities identified as too risky for retail banks to migrate to the unregulated parts of the financial system. Since this could lead to accumulation of systemic risk if left unchecked, it appears unlikely that any structural engineering will lessen the policing burden on prudential authorities and on the banks.

Separation of Commercial and Investment Banking

1989 Banking law
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Release : 1989
Genre : Banking law
Kind : eBook
Book Rating : 821/5 ( reviews)

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Book Synopsis Separation of Commercial and Investment Banking by : George James Benston

Download or read book Separation of Commercial and Investment Banking written by George James Benston. This book was released on 1989. Available in PDF, EPUB and Kindle. Book excerpt:

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