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Technological and Regulatory Forces in the Developing Fusion of Financial-Services Competition

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  • Edward J. Kane

Abstract

Productlines of traditionally heterogeneous financial institutions are rapidly fusing into a homogeneous blend, institutions and market structures are reshaping themselves to lower the cost of serving customer demand for financial services.This paper contends that contemporary adaptations exploit scope economies rooted in technological change and deposit-insurance subsidies to innovative forms of risk-bearing. As they reorient work flows, financial firms are simultaneously restructuring their organizations to lower net burdens from government regulation. Alternative state and federal regulatory and legislative bodies compete vigorously for the regulatory business of developing institutional hybrids. Evolution of Federal Reserve policy toward "nonbank banks" exemplifies the process.

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  • Edward J. Kane, 1984. "Technological and Regulatory Forces in the Developing Fusion of Financial-Services Competition," NBER Working Papers 1320, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1320
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    1. George J. Benston & Allen N. Berger & Gerald A. Hanweck & David B. Humphrey, 1983. "Economies of scale and scope in banking," Research Papers in Banking and Financial Economics 64, Board of Governors of the Federal Reserve System (U.S.).
    2. Kane, Edward J, 1981. "Accelerating Inflation, Technological Innovation, and the Decreasing Effectiveness of Banking Regulation," Journal of Finance, American Finance Association, vol. 36(2), pages 355-367, May.
    3. Buser, Stephen A & Chen, Andrew H & Kane, Edward J, 1981. "Federal Deposit Insurance, Regulatory Policy, and Optimal Bank Capital," Journal of Finance, American Finance Association, vol. 36(1), pages 51-60, March.
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    1. William F. Fox & Harold A. Black, 1994. "The Influence of State Taxation and Regulation On Selected Bank Activities," Public Finance Review, , vol. 22(3), pages 267-290, July.
    2. Edward J. Kane, 1991. "Financial Regulation and Market Forces," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 127(III), pages 325-342, September.
    3. Hilary Ingham & Steve Thompson, 1993. "Structural deregulation and market entry: the case of financial services," Fiscal Studies, Institute for Fiscal Studies, vol. 14(1), pages 1-15, February.
    4. Carow, Kenneth A., 2001. "Citicorp-Travelers Group merger: Challenging barriers between banking and insurance," Journal of Banking & Finance, Elsevier, vol. 25(8), pages 1553-1571, August.
    5. Carolyn Currie, 2003. "Towards a General Theory of Financial Regulation: Predicting, Measuring and Preventing Financial Crises," Working Paper Series 132, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    6. Arnoud Boot & Silva Dezõelan & Todd Milbourn, 1999. "Regulatory Distortions in a Competitive Financial Services Industry," Journal of Financial Services Research, Springer;Western Finance Association, vol. 16(2), pages 249-259, December.
    7. Baomin Chen & Xinyun Yang & Zhenzhong Ma, 2022. "Fintech and Financial Risks of Systemically Important Commercial Banks in China: An Inverted U-Shaped Relationship," Sustainability, MDPI, vol. 14(10), pages 1-20, May.
    8. Carow, Kenneth A. & Kane, Edward J., 2002. "Event-study evidence of the value of relaxing long-standing regulatory restraints on banks, 1970-2000," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(3), pages 439-463.
    9. Huang, Rocco R., 2008. "Evaluating the real effect of bank branching deregulation: Comparing contiguous counties across US state borders," Journal of Financial Economics, Elsevier, vol. 87(3), pages 678-705, March.
    10. Panibratov, Andrei & Chen, Xinchuan, 2018. "The role of informal institutions in the internationalization process of Chinese and Russian firms," Working Papers 15115, Graduate School of Management, St. Petersburg State University.
    11. Narayanan, Rajesh P. & Rangan, Nanda K. & Sundaram, Sridhar, 2002. "Welfare effects of expanding banking organization opportunities in the securities arena," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(3), pages 505-527.
    12. Richard Herring, 2010. "How Financial Oversight Failed & What it May Portend for the Future of Regulation," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(3), pages 265-282, September.
    13. John C. Easterwood & George Emir Morgan, 1991. "Eroding Market Imperfections, Reintermediation, And Disintermediation," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 14(4), pages 347-358, December.
    14. An, Hui & Yang, Ruibo & Ma, Xuejiao & Zhang, Siqi & Islam, Sardar M.N., 2021. "An evolutionary game theory model for the inter-relationships between financial regulation and financial innovation," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).
    15. Shutong Zhang & Jun Nagayasu, 2023. "Regional Policies’ Impacts on Urban Migration:Evidence from Special Economic Zones in China," TUPD Discussion Papers 45, Graduate School of Economics and Management, Tohoku University.
    16. Carow, Kenneth A. & Heron, Randall A., 2002. "Capital market reactions to the passage of the Financial Services Modernization Act of 1999," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(3), pages 465-485.
    17. Huang, Rocco, 2007. "Evaluating the real effect of bank branching deregulation: comparing contiguous counties across U.S. state borders," Working Paper Series 788, European Central Bank.
    18. Kane, Edward J., 1999. "Implications of superhero metaphors for the issue of banking powers," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 663-673, February.
    19. Estrella, Arturo, 2001. "Mixing and matching: Prospective financial sector mergers and market valuation," Journal of Banking & Finance, Elsevier, vol. 25(12), pages 2367-2392, December.
    20. Thomson, Di & Abbott, Malcolm, 2001. "Banking regulation and market forces in Australia," International Review of Financial Analysis, Elsevier, vol. 10(1), pages 69-86.
    21. Edward J. Kane, 1984. "Regulatory Structure in Futures Markets: Jurisdictional Competition Among the SEC, the CFTC, and Other Agencies," NBER Working Papers 1331, National Bureau of Economic Research, Inc.
    22. Catherine England, 1994. "Regulatory Restructuring: Resolving the Fed's Conflicting Roles," Cato Journal, Cato Journal, Cato Institute, vol. 13(3), pages 367-385, Winter.

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