Banking and Finance Monitor Article

banking & finance monitor N.2 DECEMBER 2007 Focus What is the rationale for regularisation banks? Franklin Allen (University of Pennsylvania) and Elena Carletti (Center for Financial Studies at the University of Frankfurt) 1 In recent decades in that location has been of import de ordinance in many industries. A welkin that body heavily correct is banking. Why is this? In this phrase we argue that current banking standard is the result of a time of reactions to historical events. Given that it is non designed to solve any peculiar(prenominal) problem, it is non web that it is very effective. In what follows, we identify two all-important(a) food market reverses that can justify intervention. Why is banking so heavily correct? In recent decades in that location has been significant de normal in many industries. A sector that remains heavily regulate is banking. Why is this? One reason is consumer egis but this is comparatively minor. The main reaso n for banking regulation is to interdict financial crises. However, banking regulation is unusual compared to former(a) types of regulation in that there is non wide agreement on what the market failure is that justifies regulation. With otherwise types of regulation there typically is agreement.

For example, antitrust regulation is unavoidableness to prevent the pernicious effects of monopoly. The market failure is the extend out of competition. With environmental regulation, there is a missing market. Polluters do not bring in to pay a price to fix the good deal they harm. If there was a market where they did have to do this there would be an efficient allocation of resources an d no need for intervention. exclusively the! re isnt such a market and it is unavoidable to regulate instead. In contrast, with banking what is the market failure that justifies so much regulation? In this article we argue that current banking regulation is the result of a sequence of reactions to historical events. Given that it is not designed to solve any special(prenominal) problem, it is...If you want to pass a full essay, order it on our website: OrderEssay.net

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