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http://hdl.handle.net/2451/27169
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| Title: | Financial Integration Across Borders and Across Sectors: Implications
for Regulatory Structures |
| Authors: | Walter, Ingo |
| Issue Date: | Jun-2002 |
| Series/Report no.: | S-FI-02-06 |
| Abstract: | This paper considers the generic processes and linkages that comprise
financial intermediation - the basic 'financial hydraulics' that
ultimately drive efficiency and innovation in the financial system and
its impact on real-sector resource allocation and economic growth.
Maximum economic welfare demands a high-performance financial system.
What does this actually mean? It documents some of the structural
changes that have occurred in both national and global financial
systems, and suggests how the microeconomics of financial intermediation
work. These can have an enormous impact on the industrial structure of
the financial services industry and on individual firms. Sequentially,
financial channels that exhibit greater static and dynamic efficiency
have supplanted less efficient ones. Competitive distortions can retard
this process, but they usually extract significant economic costs and at
the same time divert financial flows into other venues, either
domestically or elsewhere. The paper also examines the consequences of
this process in terms of financial sector reconfiguration, both within
and between the four major segments of the industry (commercial banking,
securities and investment banking, insurance, and asset management) as
well as within and between national financial systems. Finally, the
paper superimposes key regulatory overlays onto the basic economics and
facts of reconfiguration in financial intermediation. This is a
'special' industry, due both to the imbedded systemic risks and its
fiduciary nature. Balancing financial efficiency against stability and
fairness is not easy. The economics of financial intermediation are
highly regulation-sensitive, so small changes in regulation can create
important changes in markets. Regulators inevitably make some mistakes,
and regulatory mandates are unusually contentious and vulnerable to
entrenched economic interests. This is also a discussion of the linkages
between structural change in financial intermediation and supervisory
and regulatory functions, including some comparisons between US and
European legacies and prospects. |
| URI: | http://hdl.handle.net/2451/27169 |
| Appears in Collections: | Financial Institutions
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