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What's Special About Banks?

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  • George J. Benston

Abstract

I delineate six aspects of how banks have been “special” (although not unique) and then consider whether and to what extent these attributes are still relevant. These include efficiently produced products, importance for the development and growth of economies, international scope, role in economic instability and the conduct of monetary policy, early regulation by governments, and source of data for academic researchers and institutions. Despite changes in the environment and in the ways in which financial services are provided, banks still are special. However, their specialness for public policy concerns is now limited to frauds and deposit insurance. I suggest ways in which these concerns can be dealt with efficiently.

Suggested Citation

  • George J. Benston, 2004. "What's Special About Banks?," The Financial Review, Eastern Finance Association, vol. 39(1), pages 13-33, February.
    • Handle: RePEc:bla:finrev:v:39:y:2004:i:1:p:13-33
    DOI: 10.1111/j.0732-8516.2004.00065.x
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    References listed on IDEAS

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    1. Iftekhar Hasan & Larry D. Wall, 2004. "Determinants of the Loan Loss Allowance: Some Cross‐Country Comparisons," The Financial Review, Eastern Finance Association, vol. 39(1), pages 129-152, February.
    2. Calomiris, Charles W & Mason, Joseph R, 1997. "Contagion and Bank Failures during the Great Depression: The June 1932 Chicago Banking Panic," American Economic Review, American Economic Association, vol. 87(5), pages 863-883, December.
    3. George J. Benston, 1992. "The Future Of Asset Securitization: The Benefits And Costs Of Breaking Up The Bank," Journal of Applied Corporate Finance, Morgan Stanley, vol. 5(1), pages 71-82, March.
    4. George J. Benston, 1995. "Safety Nets and Moral Hazard in Banking," Palgrave Macmillan Books, in: Kuniho Sawamoto & Zenta Nakajima & Hiroo Taguchi (ed.), Financial Stability in a Changing Environment, chapter 8, pages 329-385, Palgrave Macmillan.
    5. George J. Benston & George G. Kaufman, 1988. "Risk and solvency regulation of depository institutions: past policies and current options," Staff Memoranda 88-1, Federal Reserve Bank of Chicago.
    6. George J. Benston, 1991. "Does Bank Regulation Produce Stability? Lessons from the United States," Palgrave Macmillan Books, in: Forrest Capie & Geoffrey E. Wood (ed.), Unregulated Banking, chapter 6, pages 207-240, Palgrave Macmillan.
    7. Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(3), pages 393-414.
    8. James M. Sfiridis & Kenneth N. Daniels, 2004. "The Relative Cost Efficiency of Stock versus Mutual Thrifts: A Bayesian Approach," The Financial Review, Eastern Finance Association, vol. 39(1), pages 153-179, February.
    9. George G. Kaufman, 2003. "A proposal for efficiently resolving out-of-the-money swap positions at large insolvent banks," Working Paper Series WP-03-01, Federal Reserve Bank of Chicago.
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    Cited by:

    1. Wall, Larry D. & Eisenbeis, Robert A. & Frame, W. Scott, 2005. "Resolving large financial intermediaries: Banks versus housing enterprises," Journal of Financial Stability, Elsevier, vol. 1(3), pages 386-425, April.
    2. Yin, Haiyan & Yang, Jiawen & Mehran, Jamshid, 2013. "An empirical study of bank efficiency in China after WTO accession," Global Finance Journal, Elsevier, vol. 24(2), pages 153-170.
    3. Emilia Klepczarek, 2016. "Disclosure of risk information in the European banking sector," International Economics, University of Lodz, Faculty of Economics and Sociology, issue 16, pages 350-366, December.

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