Edited by Alan M. Rugman and Gavin Boyd
Chapter 5: The US financial sector: regulatory issues
Kenneth Spong The last few decades have brought a period of unprecedented and revolutionary change into the US and international financial system, and these trends show little sign of abating. Technological innovation has enabled financial institutions to develop a wide range of new and more complex financial instruments and to deliver services or process transactions over the Internet, through large switching networks, or with global clearing and communications systems. Other notable changes include the rise in trading and capital markets activities, rapid consolidation among financial institutions, and increasing international linkages throughout the financial system. Also, the financial industry is rapidly emerging from a regulatory framework that had previously limited the competitive interplay among banks, securities firms and insurance companies All these developments in the US and the international financial system are raising questions and issues for the management of financial institutions and for regulatory authorities. Managers at financial institutions are having to make critical decisions regarding how to manage their risk exposure as they undertake new activities and enter an uncertain environment, and as they face rising domestic and global competitive pressures. In a similar manner, banking supervisors and other financial authorities are having to move quickly from a regulatory framework based on restrictive rules and parameters to a system that provides more leeway for innovation and competition among different institutions and markets. In addition, national regulators – bound by their own laws and practices – are having to grapple with another issue – how to coordinate effectively the supervision of global institutions,...
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