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The changing borders of banking: trends and implications

  • Claudio E. V. Borio
  • Renato Filosa

The paper outlines the evolution of the financial industry across industrialised countries since liberalisation gathered momentum in the 1980s and assesses its implications for prudential regulation and supervision, paying particular attention to changes in the degree of compartmentalisation between (commercial and investment) banking, insurance and non-financial business activities. Two key conclusions are highlighted. First, as segmentation has weakened, the compartmentalisation of prudential regulation and supervision has come under pressure. At the same time, how far harmonisation in prudential arrangements can, or indeed, should, be extended remains a moot question. Second, the changes have also put a premium on the need to find an appropriate balance between official and market discipline. The scope for improvement in this area should not be underestimated. It is argued that information disclosure should be strengthened and capital standards upgraded.

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Paper provided by Bank for International Settlements in its series BIS Working Papers with number 23.

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Length: 42 pages
Date of creation: Oct 1994
Date of revision:
Handle: RePEc:bis:biswps:23
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  1. Goto, Akira, 1982. "Business groups in a market economy," European Economic Review, Elsevier, vol. 19(1), pages 53-70.
  2. Baumol, William J. & Willig, Robert D., 1986. "Contestability: Developments Since the Book," Working Papers 86-01, C.V. Starr Center for Applied Economics, New York University.
  3. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
  4. Black, Fischer & Miller, Merton H & Posner, Richard A, 1978. "An Approach to the Regulation of Bank Holding Companies," The Journal of Business, University of Chicago Press, vol. 51(3), pages 379-412, July.
  5. Philippe Aghion & Oliver Hart & John Moore, 1992. "The Economics of Bankruptcy Reform," NBER Working Papers 4097, National Bureau of Economic Research, Inc.
  6. Mayer, Colin, 1988. "New issues in corporate finance," European Economic Review, Elsevier, vol. 32(5), pages 1167-1183, June.
  7. Schwartz, Marius, 1986. "The Nature and Scope of Contestability Theory," Oxford Economic Papers, Oxford University Press, vol. 38(0), pages 37-57, Suppl. No.
  8. Mark Gertler, 1988. "Financial structure and aggregate economic activity: an overview," Proceedings, Federal Reserve Bank of Cleveland, pages 559-596.
  9. Steinherr, Alfred & Huveneers, Christian, 1990. "Universal Banks: The Prototype of Successful Banks in the Integrated European Market? A View inspired by German Experience," Discussion Papers (ECON - Département des Sciences Economiques) 1990001, Université catholique de Louvain, Département des Sciences Economiques.
  10. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
  11. White, Michelle J, 1989. "The Corporate Bankruptcy Decision," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 129-51, Spring.
  12. Baumol, William J & Willig, Robert D, 1986. "Contestability: Developments since the Book," Oxford Economic Papers, Oxford University Press, vol. 38(0), pages 9-36, Suppl. No.
  13. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1990. "The Role of Banks in Reducing the Costs of Financial Distress in Japan," NBER Working Papers 3435, National Bureau of Economic Research, Inc.
  14. Mark Carey S. & Stephen Prowse & John Rea & Gregory Udell, 1993. "The economics of the private placement market," Staff Studies 166, Board of Governors of the Federal Reserve System (U.S.).
  15. Krummel, Hans-Jacob, 1980. "German universal banking scrutinized : Some remarks concerning the Gessler report," Journal of Banking & Finance, Elsevier, vol. 4(1), pages 33-55, March.
  16. Goodhart, C A E, 1987. "Why Do Banks Need a Central Bank?," Oxford Economic Papers, Oxford University Press, vol. 39(1), pages 75-89, March.
  17. Stiglitz, Joseph E, 1985. "Credit Markets and the Control of Capital," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(2), pages 133-52, May.
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