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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/28310
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| Title: | The New Case for Functional Separation in Wholesale Financial Services |
| Authors: | Walter, Ingo |
| Issue Date: | 31-Jul-2009 |
| Series/Report no.: | FIN-09-017 |
| Abstract: | This paper reexamines the separation of commercial and investment
banking in the context of modern wholesale financial environment,
dominated by a small cohort of “systemic” institutions. The
paper traces the pathology of regulation and deregulation from the
watershed events of the 1930s to the systemic financial failures of the
recent past. It then considers the structure, conduct and performance of
the wholesale financial industry and how firms that cannot be allowed to
collapse get that way. Based on the industrial organization of global
wholesale finance, the paper then examines the available regulatory
techniques, and makes some judgments as to their relative promise in
promoting future financial stability with least possible dislocation of
financial efficiency, proposing benchmarks for the calibration of
proposals for regulatory reform. The paper then evaluates functional
separation and carve-outs of high-risk activities that cannot defensibly
be conducted within systemic financial firms in the real world of power
politics and regulatory capture. The paper concludes that blanket
condemnation of the functional-separation features of the 1930s
financial reforms is unwarranted in the light of ongoing experience, and
that it is time to revisit this issue in reconfiguring the global
wholesale financial architecture. |
| URI: | http://hdl.handle.net/2451/28310 |
| Appears in Collections: | Finance Working Papers
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