Firewalls

25 Pages Posted: 17 Nov 2012

See all articles by John R. Walter

John R. Walter

Federal Reserve Banks - Federal Reserve Bank of Richmond

Date Written: 1996

Abstract

Since the banking crisis of the early 1930s, laws and regulations have restricted banks' transactions with their nonbank affiliates. These restrictions, commonly known as firewalls, are meant to prevent the spread of financial difficulties within a banking company. In certain circumstances, banking company owners gain from shifts of nonbank losses to affiliated banks while the federal deposit insurance fund loses. Firewalls may provide a valuable regulatory tool for containing banking company owners' incentives to employ such shifts.

Suggested Citation

Walter, John R., Firewalls (1996). FRB Richmond Economic Quarterly, vol. 82, no. 4, Fall 1996, pp. 15-39, Available at SSRN: https://ssrn.com/abstract=2125954

John R. Walter (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

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