Securities Activities in Banking Conglomerates: Should Their Location Be Regulated?

Posted: 15 Jul 1997 Last revised: 5 Oct 2009

Date Written: 1998

Abstract

This paper reviews the arguments as to whether the location of the securities unit in a banking conglomerate should be subject to regulation. This review is complemented with evidence on the regulations and on securities units' predominant location in the G--10 countries and in the United States before the Glass--Steagall Act. The paper argues that correcting the safety net's distortions and allowing banks to choose where to locate their securities units is a better alternative than retaining such distortions and relying on corporate separateness to limit the problems they may create. Separateness imposes costs and provides banks with insulation that is more apparent than real. However, if authorities opt for requiring separateness, a regulation allowing banks to choose between the bank-parent model and the holding- company model seems more appropriate than a regulation requiring them to adopt either one of these models.

JEL Classification: G21, G24, G28

Suggested Citation

Santos, João A. C., Securities Activities in Banking Conglomerates: Should Their Location Be Regulated? (1998). Cato Journal, Vol. 18, No. 1, 1998. Available at SSRN: https://ssrn.com/abstract=8423

João A. C. Santos (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-5583 (Phone)
212-720-8363 (Fax)

HOME PAGE: HTTP://WWW.NEWYORKFED.ORG/RMAGHOME/ECONOMIST/SANTOS/CONTACT.HTML

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