IDEAS home Printed from https://ideas.repec.org/p/idb/wpaper/4054.html
   My bibliography  Save this paper

How Should Financial Institutions and Markets be Structured? Analysis and Options for Financial System Design

Author

Listed:
  • George G. Kaufman
  • Randall S. Kroszner

Abstract

This paper analyzes the consequences of alternative financial structures for financial efficiency and stability. The focus is on the organizational structure of banks. Alternative bank structures range from `narrow banks` to broad `universal banks. ` Each banking structure is assessed in its ability to satisfy the objectives of efficiency and stability in the financial system stability, economies of scale and scope, competition, avoiding regulatory capture, conflicts of interest and political manipulation, corporate control and management of financial distress, and monetary control. No one reform is appropriate for all countries, and no single reform guarantees that the objectives will be attained or maintained.

Suggested Citation

  • George G. Kaufman & Randall S. Kroszner, 1997. "How Should Financial Institutions and Markets be Structured? Analysis and Options for Financial System Design," Research Department Publications 4054, Inter-American Development Bank, Research Department.
  • Handle: RePEc:idb:wpaper:4054
    as

    Download full text from publisher

    File URL: http://www.iadb.org/research/pub_hits.cfm?pub_id=WP-338&pub_file_name=pubWP-338.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Pulley, Lawrence B & Humphrey, David B, 1993. "The Role of Fixed Costs and Cost Complementarities in Determining Scope Economies and the Cost of Narrow Banking Proposals," The Journal of Business, University of Chicago Press, vol. 66(3), pages 437-462, July.
    2. Jith Jayaratne & Philip E. Strahan, 1996. "The Finance-Growth Nexus: Evidence from Bank Branch Deregulation," The Quarterly Journal of Economics, Oxford University Press, vol. 111(3), pages 639-670.
    3. Randall S. Kroszner & Thomas Stratmann, 1996. "Competition among financial services political action committees: theory and evidence," Proceedings 509, Federal Reserve Bank of Chicago.
    4. Lummer, Scott L. & McConnell, John J., 1989. "Further evidence on the bank lending process and the capital-market response to bank loan agreements," Journal of Financial Economics, Elsevier, vol. 25(1), pages 99-122, November.
    5. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
    6. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    7. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1990. "The role of banks in reducing the costs of financial distress in Japan," Journal of Financial Economics, Elsevier, vol. 27(1), pages 67-88, September.
    8. Kroszner, Randall S & Stratmann, Thomas, 1998. "Interest-Group Competition and the Organization of Congress: Theory and Evidence from Financial Services' Political Action Committees," American Economic Review, American Economic Association, vol. 88(5), pages 1163-1187, December.
    9. 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.
    10. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
    11. Peltzman, Sam, 1970. "Capital Investment in Commercial Banking and Its Relationship to Portfolio Regulation," Journal of Political Economy, University of Chicago Press, vol. 78(1), pages 1-26, Jan.-Feb..
    12. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
    13. Tyler Cowen & Randall Kroszner, 1990. "Mutual Fund Banking: A Market Approach," Cato Journal, Cato Journal, Cato Institute, vol. 10(1), pages 223-237, Spring/Su.
    14. White, Eugene Nelson, 1986. "Before the Glass-Steagall Act: An analysis of the investment banking activities of national banks," Explorations in Economic History, Elsevier, vol. 23(1), pages 33-55, January.
    15. Kroszner, Randall S & Rajan, Raghuram G, 1994. "Is the Glass-Steagall Act Justified? A Study of the U.S. Experience with Universal Banking before 1933," American Economic Review, American Economic Association, vol. 84(4), pages 810-832, September.
    16. Kroszner, Randall S. & Rajan, Raghuram G., 1997. "Organization structure and credibility: Evidence from commercial bank securities activities before the Glass-Steagall Act," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 475-516, August.
    17. Tyler Cowen & Randall S. Kroszner, 1994. "The new monetary economics," Chapters, in: Peter J. Boettke (ed.), The Elgar Companion to Austrian Economics, chapter 86, Edward Elgar Publishing.
    18. Kroszner, Randall S & Strahan, Philip E, 1996. "Regulatory Incentives and the Thrift Crisis: Dividends, Mutual-to-Stock Conversions, and Financial Distress," Journal of Finance, American Finance Association, vol. 51(4), pages 1285-1319, September.
    19. Holderness, Clifford G. & Kroszner, Randall S. & Sheehan, Dennis P., 1996. "Were the Good Old Days That Good? The Evolution of Managerial Stock Ownership Since the Great Depression," Working Papers 131, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    20. Caprio, Gerard Jr. & Klingebiel, Daniela, 1996. "Bank insolvencies : cross-country experience," Policy Research Working Paper Series 1620, The World Bank.
    21. Edward J. Kane & Min-Teh Yu, 1994. "How much did capital forbearance add to the tab for FSLIC mess?," Proceedings 33, Federal Reserve Bank of Chicago.
    22. Boyd, John H. & Graham, Stanley L. & Hewitt, R. Shawn, 1993. "Bank holding company mergers with nonbank financial firms: Effects on the risk of failure," Journal of Banking & Finance, Elsevier, vol. 17(1), pages 43-63, February.
    23. Billett, Matthew T & Flannery, Mark J & Garfinkel, Jon A, 1995. "The Effect of Lender Identity on a Borrowing Firm's Equity Return," Journal of Finance, American Finance Association, vol. 50(2), pages 699-718, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. George G. Kaufman & Randall S. Kroszner, 1997. "¿Cómo se deberían estructurar las instituciones y los mercados financieros? Análisis y opciones de diseño de sistemas financieros," Research Department Publications 4055, Inter-American Development Bank, Research Department.
    2. Randall S. Kroszner & Philip E. Strahan, 2014. "Regulation and Deregulation of the US Banking Industry: Causes, Consequences, and Implications for the Future," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 485-543, National Bureau of Economic Research, Inc.
    3. João Santos, 1998. "Commercial Banks in the Securities Business: A Review," Journal of Financial Services Research, Springer;Western Finance Association, vol. 14(1), pages 35-60, July.
    4. Gorton, Gary & Winton, Andrew, 2003. "Financial intermediation," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 8, pages 431-552, Elsevier.
    5. Berger, Allen N. & Demsetz, Rebecca S. & Strahan, Philip E., 1999. "The consolidation of the financial services industry: Causes, consequences, and implications for the future," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 135-194, February.
    6. Kroszner, Randall S., 1999. "Is the Financial System Politically Independent? Perspectives on the Political Economy of Banking and Financial Regulation," Working Papers 151, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    7. Kroszner, Randall S. & Strahan, Philip E., 1999. "Bankers on Boards: Monitoring Conflicts of Interest & Lender Liability," Working Papers 150, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    8. Philip E. Strahan, 2013. "Too Big to Fail: Causes, Consequences, and Policy Responses," Annual Review of Financial Economics, Annual Reviews, vol. 5(1), pages 43-61, November.
    9. Kroszner, Randall S. & Rajan, Raghuram G., 1997. "Organization structure and credibility: Evidence from commercial bank securities activities before the Glass-Steagall Act," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 475-516, August.
    10. Allen N. Berger & Gregory F. Udell, 1994. "Lines of credit and relationship lending in small firm finance," Proceedings 52, Federal Reserve Bank of Chicago.
    11. Randall S. Kroszner & Philip E. Strahan, 1999. "Bankers on Boards: Monitoring, Conflicts of Interest, and Lender Liability," NBER Working Papers 7319, National Bureau of Economic Research, Inc.
    12. Howard Bodenhorn, 2016. "Two Centuries of Finance and Growth in the United States, 1790-1980," Working Papers id:11352, eSocialSciences.
    13. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.),Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084, Central Bank of Chile.
    14. Randall S. Kroszner & Philip E. Strahan, 2001. "Obstacles to Optimal Policy: The Interplay of Politics and Economics in Shaping Bank Supervision and Regulation Reforms," NBER Chapters, in: Prudential Supervision: What Works and What Doesn't, pages 233-272, National Bureau of Economic Research, Inc.
    15. Luigi Zingales & Raghuram G. Rajan, 2003. "Banks and Markets: The Changing Character of European Finance," NBER Working Papers 9595, National Bureau of Economic Research, Inc.
    16. Randall S. Kroszner & Philip E. Strahan, 1998. "What Drives Deregulation? Economics and Politics of the Relaxation of Bank Branching Restrictions," NBER Working Papers 6637, National Bureau of Economic Research, Inc.
    17. Al-Jarhi, Mabid Ali, 2005. "The Case For Universal Banking As A Component Of Islamic Banking," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 13, pages 2-65.
    18. Obregon, Carlos, 2018. "Globalization misguided views," MPRA Paper 85813, University Library of Munich, Germany.
    19. Fohlin, Caroline, 1999. "Universal Banking in Pre-World War I Germany: Model or Myth?," Explorations in Economic History, Elsevier, vol. 36(4), pages 305-343, October.
    20. Kroszner, Randall S., 2000. "Obstacles To Optimal Policy: The Interplay of Politics and Economics in Shaping Bank Supervision and Regulation Reforms," Working Papers 158, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:idb:wpaper:4054. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Felipe Herrera Library (email available below). General contact details of provider: https://edirc.repec.org/data/iadbbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.