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Edited by Andrew W. Mullineux and Victor Murinde
21. US banking regulation: practice and trends Joseph J. Norton and Christopher D. Olive 1 INTRODUCTION The purpose of this chapter is twofold: ﬁrst to explore brieﬂy a series of selective trends generally impacting upon the shape and face of banking and bank regulation in the United States; and second to focus on three of the more speciﬁc and complex bank regulatory trends in the US banking industry as it enters the twenty-ﬁrst century with respect to bank-HLIs (that is, highly leveraged institutions) relationships, OTC (that is, over-the-counter) derivatives, and banking organization activities following the most recent enactment of the new federal Gramm–Leach–Bliley Modernization Act of 1999 (‘GLBA’) (FRB, 2000). As to the selective general trends, these will be touched upon in Section 2 and will include (i) the consolidation of banking groups and institutions, (ii) the rise of ﬁnancial conglomerates, (iii) the redeﬁning of ‘banking business’ resulting from the rapid technological and product innovations impacting ﬁnancial markets and services, (iv) the search for a role for community banking institutions, and (v) the protection of the individual users. Section 3 turns to the speciﬁc and more complex bank regulatory trends by reviewing deﬁning regulatory reports issued by the President’s Working Group on Financial Markets (‘Working Group’). The ﬁrst Working Group Report addressed, among other things, banking organization failures regarding counterparty credit risk management arising from the long-term capital management (LTCM) episode of August–September 1998. The second Working Group Report addressed the...
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