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A Two-Tiered System Of Regulation Is Needed To Preserve The Viability Of Community Banks And Reduce The Risks Of Megabanks, Arthur E. Wilmarth Jr.
A Two-Tiered System Of Regulation Is Needed To Preserve The Viability Of Community Banks And Reduce The Risks Of Megabanks, Arthur E. Wilmarth Jr.
GW Law Faculty Publications & Other Works
The financial crisis of 2007-2009 and its aftermath have accelerated a consolidation trend that has transformed the U.S. banking system during the past three decades. During that period, the number of community banks and their share of the banking industry’s assets have fallen by more than half, while the largest banks have captured much of the industry’s assets. In responding to the financial crisis, the federal government encouraged further consolidation by adopting extraordinary assistance programs and forbearance measures designed to ensure the survival of the biggest institutions. In contrast, federal officials gave little help to community banks and subjected them …
Narrow Banking As A Structural Remedy For The Problem Of Systemic Risk: A Comment On Professor Schwarcz's Ring-Fencing, Arthur E. Wilmarth Jr.
Narrow Banking As A Structural Remedy For The Problem Of Systemic Risk: A Comment On Professor Schwarcz's Ring-Fencing, Arthur E. Wilmarth Jr.
GW Law Faculty Publications & Other Works
In a recent article, Professor Steven Schwarcz describes the concept of "ring-fencing" as a "potential regulatory solution to problems in banking, finance, public utilities, and insurance." Ring-fencing has gained particular prominence in recent years as a strategy for limiting the systemic risk of large financial conglomerates (also known as "universal banks"). Professor Schwarcz’s article describes several ring-fencing plans that have been adopted or proposed in the United States, the United Kingdom, and the European Union.
This Comment argues that "narrow banking" is a highly promising ring-fencing remedy for the risks created by universal banks. As the Comment explains, narrow banking …