Commercial and Investment Banking Activities: Combined?

Abstract:     
Several factors have been blamed for the recent financial crisis and while banks have been centred in the main causes of it , the separation of investment and commercial banking activities does not seem to be the solution (“Separating Investment Banks...” 2010, para 2; Walter, 2009).

In fact, the re-introduction of the Glass-Steagall Act of 1993; could be quite damaging to the global economy due to major advancements in technology and the advent of globalisation, since 1933 (“Separating Investment Banks...” 2010, para 2).

This paper analyses information on the Glass-Steagall Act in terms of how it came about and how it would impact the global economy today. Taking the above mentioned developments into account as well as the growing evidence that banks need to be too big to fail (Walter, 2009) in order to survive (Cabral & Santos, 2001); this paper concludes that, investment and commercial banking activities should not be separated. Instead, adequate regulation should be in place to safeguard banks from failing.

Number of Pages in PDF File: 18

Keywords: Glass-Steagall, Basel Accord, Universality, Commercial and Investment Banks

working papers series