Governing Banking’s Future: Markets vs. Regulation

1. Front Matter

   Pages ii-vii

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2. Overview

   1. Front Matter

      Pages 1-1

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   2. Introduction: The Uncertain Future of U.S. Banking

      • Catherine England

      Pages 3-9

   3. Governing Banking’s Future: A View from the Fed

      • H. Robert Heller

      Pages 11-17

3. International Coordination of Regulation

   1. Front Matter

      Pages 19-19

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   2. International Regulation: How Much Cooperation is Needed?

      • P. Michael Laub

      Pages 21-31

   3. Tension Between Competition and Coordination in International Financial Regulation

      • Edward J. Kane

      Pages 33-47

   4. Comment on International Coordination of Regulation

      • Michael C. Keeley

      Pages 49-55

4. Bank Insulation

   1. Front Matter

      Pages 57-57

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   2. Can Banks be Insulated from Nonbank Affiliates?

      • James L. Pierce

      Pages 59-77

   3. Banks are not Special: The Federal Safety Net and Banking Powers

      • Walker F. Todd

      Pages 79-105

   4. Comment on Insulating Banks

      • John H. Kareken

      Pages 107-110

   5. Comment on Bank Insulation

      • Gerald P. O’Driscoll Jr.

      Pages 111-114

5. Payment System Risk

   1. Front Matter

      Pages 115-115

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   2. Daylight Overdrafts: Who Really Bears the Risk?

      • Robert T. Clair

      Pages 117-140

   3. Payment System Risk: A Private-Sector View

      • Gerard F. Milano

      Pages 141-160

   4. The Government’s Role in Payment Systems: Lessons from the Canadian Experience

      • Angela Redish

      Pages 161-180

   5. Comment on Payment System Risk

      • Mark J. Flannery

      Pages 181-187

   6. A Proposal to Rely on Market Interest Rates on Intraday Funds to Reduce Payment System Risk

      • Wayne D. Angell

      Pages 189-195

6. Back Matter

   Pages 197-202

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Risk-based capital standards presume a need for common capital standards across countries. The details of forging an agreement were left to the staffs of the primary bank regulators in each country, and compromises were inevitable. Although domestic constituencies' reactions to the proposals were invited, the arduous negotiations that led to the proposals generated intense pressure on the principals not to make changes. The European Community's approach to financial integration seems to be driven by a political desire to achieve an integrated market within Europe, despite significant institutional differences among countries. Underlying that desire is a belief that the market pressures that result from different regulatory systems operating in the same market will produce the right answer. The financial provisions of the U.S.-Canada free-trade agreement take a direction that, in my judgment, is more productive. The provisions are more limited in scope than are those of the European initiative. National treatment and national sovereignty are preserved. However, the delicate issue of national responsibility for failing institutions, and its relationship to monetary policies, is not addressed. A Better Alternative A productive basis for international regulation can be formulated around three principles: 1. free entry for foreign-owned subsidiaries chartered under the laws of the host country; 2. national treatment for those subsidiaries; and 3. national responsibility for (a) monetary policy, (b) prevention of unwarranted financial panics in domestically chartered institutions, whether foreign or domestically owned, and (c) supervision of all domestically chartered institutions, regardless of ownership.

• Bank
• Europe
• Rating
• banking
• competition
• monetary policy
• prevention

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