By Jill M. Hendrickson
The old reaction to financial institution crises has regularly been extra rules. A development emerges that a few may possibly locate amazing: rules usually contributes to financial institution instability. It suppresses pageant and powerful reaction to industry adjustments and encourages bankers to tackle extra hazard. This ebook deals a beneficial background lesson for coverage makers.
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Additional resources for Regulation and Instability in U.S. Commercial Banking: A History of Crises
These are examples of bank regulation that have historically changed the cost and revenue opportunities for the commercial banker. If the regulation increases costs or decreases revenue, or both, it compromises bank profitability and contributes to bank instability. A fourth channel in which regulation impacts bank stability is by influencing the structure of commercial banking. That is, regulation influences the choices made by bankers which, in turn, determines the size and number of banks. Regulation in the United States has created a landscape of thousands of banks, most of whom are relatively small when measured by the dollar value of assets.
S. Commercial Banking the following section considers regional differences in antebellum state banking. A. 2 contains a description of the states in different regions as well as the characteristics of banking in each region. The New England region contained many small commercial banks with a strong reliance on interbank deposits which, as mentioned above, contributed to the higher note quality. Another contributing factor to maintaining note quality was the presence of note redemption centers. S.
Increase risk. • Increased stability to the extent that bank runs were reduced. • Decrease stability by reducing competition for depositors and the accompanying moral hazard. • Decreased stability because of reduced profit and increased risk. • Decrease competition. • Decreased stability to the extent • Indirectly, discourage branching. that it discouraged branching • Indirectly, limits geographic and reduced competition. diversification. • Change bank structure by limiting bank size. S. Commercial Banking, Jill M.