Copyright © 2000 Addison Wesley Longman Slide #16-1 Chapter Sixteen COMMERCIAL BANKING INDUSTRY: STRUCTURE AND COMPETITION

Copyright © 2000 Addison Wesley Longman Slide #16-1

Chapter Sixteen

COMMERCIAL BANKING INDUSTRY: STRUCTURE AND

COMPETITION


Historical Development of the Banking Industry Outcome:

Multiple Regulatory Agencies

1. Federal Reserve

2. FDIC

3. Office of the Comptroller of the Currency

4. State Banking Authorities

金融監理一元化 ?

金融局


Structure of the Commercial Banking Industry


Ten Largest U.S. Banks


Branching RegulationsBranching Restrictions:

Very anticompetitive

Response to Branching Restrictions1. Bank Holding Companies

A. Allowed purchases of banks outside state

B. BHCs allowed wider scope of activities by Fed

C. BHCs dominant form of corporate structure for banks

2. Nonbank BanksNot subject to branching regulations, but loophole closed

in 1987

3. Automated Teller MachinesNot considered to be branch of bank, so networks

allowed

To issue commercial paper and lend to commercial bank

Deposit 與 loan 只做一樣


Bank Consolidation and Number of Banks

1. 規模經濟，成本2. 多角化，風險3. 出現 super regional bank v.s. money center bank


Nationwide Banking and Bank Consolidation

Bank Consolidation: Why? 1.Branching restrictions weakened

2.Development of superregional banks

Riegle-Neal Act of 19941.Allows full interstate branching

2.Promotes further consolidation

Future of Industry StructureWill become more like other countries, but not quite:

Several thousand, not several hundred


Nationwide Banking and Bank Consolidation

Bank Consolidation: A Good Thing?壞處 Cons:

1. Fear of decline of small banks and small business lending, 使金融業變成 less competitive

2. Rush to consolidation may increase risk taking

好處 Pros:1. Community banks will survive 事實如此，如紐約州、加州2. Increase competition 使無效率之銀行退出市場3. Increased diversification of bank loan portfolios: lessens

likelihood of failures

自然 or 強迫 ?


Separation of Banking and Securities Industries: Glass-Steagall：已被取消

Case for Glass-Steagall

1. FDIC gives unfair advantage to banks2. Allowing banks into underwriting is dangerous because

FDIC promotes too much risk takingmoral hazard3. Potential conflicts of interest

Case Against Glass-Steagall1. Decreases competition2. Unfair to banks3. Hinders diversification

Will Separation Continue?Fed, OCC, FDIC are allowing banks to engage in underwriting activities

銀行業的資金成本較便宜

若銀行承銷其貸款客戶的股票

證券業已可像銀行一樣吸收存款，而銀行卻不能進入獲利較佳的證券業務

Citibank 和 Traveler 1998 年之合併其實是違法 !


Separation in Other Countries1. Universal banking: Germany

2. British-style universal banking

3. U.S./Japan separation

Separation of Banking and Securities Industries: Glass-Steagall

面臨別國銀行 ( 不見得有 G-S 法案之限制 ) 之競爭

可以 underwriting ，但需在不同的子公司，較不能持有公司股票，較少和保險結合

不准買公司股票。可有BHC

不能有 BHC 可以持有公司股票


International BankingWhy Rapid Growth

1. Rapid growth of international trade

2. Banks abroad can pursue activities not allowed in home country

3. Tap into Eurodollar market

U.S. Banks Overseas 1. Regulators

A. Federal Reserve (Regulation K)

2. StructureA. Edge Act Corporations

B. International Banking Facilities

為了與外國銀行競爭，成立了 OBU (offshore banking unit), 存貸皆外幣為之，且不課稅，不受存款準備率之規範


Foreign Banks in U.S.1. Regulators

A. Same as for U.S. domestic banks

2. StructureA. 500 offices in U.S.

B. 20% of total U.S. bank assets

International Banking


Ten Largest Banks in the World


Financial Innovation and Decline in Traditional Banking

Innovations Increasing Competition against commercial banks1. Money market mutual funds

— Avoids deposit rate ceilings and reserve requirements

2. Junk bonds— Result of better info in credit markets

3. Commercial paper market— Result of better info in credit markets and rise in money market

mutual funds

4. Securitization— Result of better info in credit markets and computer technology

由於 computer 及 telecommunication

2/3 的自用住宅來抵押貸款已被證券化了 !

評估信用風險降低交易成本


The Decline in Banks as a Source of Finance

For nonfinancial firms


Bank Profitability


Share of Noninterest Income


Decline in Traditional Banking

Loss of Cost Advantages in Acquiring Funds (Liabilities)

π i then disintermediation because1. Deposit rate ceilings and regulation Q

2. Money market mutual funds

3. Foreign banks have cheaper source of funds: Japanese banks can tap large savings pool


Decline in Traditional Banking

Loss of Income Advantages on Uses of Funds (Assets)1. Easier to use securities markets to raise funds:

commercial paper, junk bonds, securitization

2. Finance companies more important because easier for them to raise funds

一般企業

Issue C.P.

其他非銀行之金融機構也可以 make loan 之後再加以證券化由於 computer tech 使得：交易成本；資訊收集容易，風險易評估


Bank Failures


Banks' Response

Loss of cost advantages in raising funds and income advantages in making loans causes reduction in profitability in traditional banking1. Expand lending into riskier areas: e.g., real

estate

2. Expand into off-balance sheet activities

3. Creates problems for U.S. regulatory system

Similar problems for banking industry in other countries

Documents

Copyright © 2000 Addison Wesley Longman Slide #16-1 Chapter Sixteen COMMERCIAL BANKING INDUSTRY: STRUCTURE AND COMPETITION