The Impact of Securitisation and Internationalisation on Market Imperfections: Implications for Regulatory Reform and the Structure of the Payments System

The United States and the international banking system have changed radically in the past decade. Competition has increased as entry barriers to markets have eroded. Internationally, more and more institutions have expanded abroad and markets have become increasingly global. On domestic fronts, new non-bank competitors have begun to provide alternative services, products permitted to existing institutions have expanded, and in the United States, barriers to interstate expansion have finally begun to crumble.1 These changes have narrowed spreads, reduced profitability and altered the way payments are made. In the United States, the failure rate of banks and thrift institutions is at an all-time high, raising important concerns about threats to the viability of banking institutions and to the stability of financial markets and the payments system.2 These problems, fuelled by frustrations with the current regulatory structure, which many believe is outmoded in today’s competitive environment, and the perceived competitive inequities resulting from differential regulation of competitors, have become major sources of pressure for regulatory reform. Similar pressures operate in other nations as we11.3