Table of Contents

Direct Charging of Card Fees

Stephen P. King, Monash University - Department of Economics, Productivity Commission
Rodney Maddock, Monash Business School, Victoria University

Private Investment Fund Regulation - Theory and Empirical Evidence from 1998 to 2016

Wulf A. Kaal, University of St. Thomas, Minnesota - School of Law

Systemic Risk and Regulation: The Misguided Case of Insurance SIFIs

Scott E. Harrington, University of Pennsylvania - Wharton School

The Impact of Price Controls in Two-Sided Markets: Evidence from US Debit Card Interchange Fee Regulation

Mark D. Manuszak, Board of Governors of the Federal Reserve System
Krzysztof Wozniak, Board of Governors of the Federal Reserve System


REGULATION OF FINANCIAL INSTITUTIONS eJOURNAL

"Direct Charging of Card Fees" Free Download
Monash University, Australian Centre for Financial Studies, Working Paper May 2017

STEPHEN P. KING, Monash University - Department of Economics, Productivity Commission
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RODNEY MADDOCK, Monash Business School, Victoria University
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Australia’s payment card regulations are similar to those used in a variety of countries around the world. However, as we argue below, they are complex, open to gaming and have failed to win support from consumers.In this paper, we present an alternative approach to regulation involving direct charging for card fees. This approach is technically feasible, improves transparency, meets the objective of efficiency of the payment’s system, and is simpler than current regulation.

"Private Investment Fund Regulation - Theory and Empirical Evidence from 1998 to 2016" Free Download

WULF A. KAAL, University of St. Thomas, Minnesota - School of Law
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Private investment fund regulation in the United States evolved substantially in the last two decades. Tracing the main regulatory developments, this article summarizes the author’s theoretical and empirical findings on the effects of changes in private investment fund regulation from 2006 to 2016, assessing the regulatory implications of the failure of Long-Term Capital Management L.P. in 1998 and the Dodd-Frank Act in 2010. More recent trends include the emerging confluence of private investment funds and mutual funds as well as private investment funds’ use of blockchain technology and smart contracts.

"Systemic Risk and Regulation: The Misguided Case of Insurance SIFIs" Free Download

SCOTT E. HARRINGTON, University of Pennsylvania - Wharton School
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This paper provides an overview of research and debate over whether insurance poses systemic risk, with a focus on U.S. life insurance. It considers the Financial Stability Oversight Council (FSOC) process for designating nonbank financial institutions as systemically important and subject to enhanced supervision by the Federal Reserve under Section 113 of the Dodd-Frank Act, the FSOC’s rationales for designating AIG, Prudential, and MetLife, and MetLife’s challenge. The paper highlights the adverse consequences of designating individual insurance entities for enhanced supervision, which favor an alternative activities-based approach to addressing potential systemic risk.

The principal conclusions are:

(1) there is no compelling evidence that any life insurer poses a threat to the financial stability of the United States,

(2) the Section 113 and FSOC regime of designating individual insurance organizations as subject to enhanced supervision is flawed in concept and execution, and

(3) it would be preferable to move towards an activities-based approach to systemic risk monitoring and supervision.

"The Impact of Price Controls in Two-Sided Markets: Evidence from US Debit Card Interchange Fee Regulation" Free Download
FEDS Working Paper No. 2017-074

MARK D. MANUSZAK, Board of Governors of the Federal Reserve System
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KRZYSZTOF WOZNIAK, Board of Governors of the Federal Reserve System
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We study the pricing of deposit accounts following a regulation that capped debit card interchange fees in the United States and provide the first empirical investigation of the link between interchange fees and granular deposit account prices. This link is broadly predicted by the theoretical literature on two-sided markets, but the nature and magnitude of price changes are key empirical issues. To examine the ways that banks adjusted their account prices in response to the regulatory cap on interchange fees, we exploit the cap's differential applicability across banks and account types, while accounting for equilibrium spillover effects on banks exempt from the cap. Our results show that banks subject to the cap raised checking account prices by decreasing the availability of free accounts, raising monthly fees, and increasing minimum balance requirements, with different adjustment across account types. We also find that banks exempt from the cap adjusted prices as a competitive response to price changes made by regulated banks. Not accounting for such competitive responses underestimates the policy's impact on the market, for both banks subject to the cap and those exempt from it.

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About this eJournal

This eJournal distributes working and accepted paper abstracts covering regulatory and legal aspects of national and international financial institutions. The eJournal welcomes research that deals with legal aspects of depository institutions including banks, credit unions, trust companies, and mortgage loan companies. Topics also include regulation of insurance companies, brokers, underwriters, and investment funds.

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BANKING & FINANCIAL INSTITUTIONS EJOURNALS

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SSRN, Harvard Business School, National Bureau of Economic Research (NBER), European Corporate Governance Institute (ECGI), Harvard University - Accounting & Control Unit
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Regulation of Financial Institutions eJournal

EDWARD I. ALTMAN
Senior Advisor, Credit and Debt Markets Research Program, New York University (NYU) - Salomon Center, Max L. Heine Emeritus Professor of Finance, New York University (NYU) - Department of Finance

DENNIS R. CAPOZZA
Professor Emeritus, Ross School of Business, University of Michigan

DONALD CHEW
Morgan Stanley Investment Management

J. DAVID CUMMINS
Joseph E. Boettner Professor, Temple University - Risk Management & Insurance & Actuarial Science

DOUGLAS W. DIAMOND
Merton H. Miller Distinguished Service Professor of Finance, University of Chicago - Booth School of Business, National Bureau of Economic Research (NBER)

EUGENE F. FAMA
Robert R. McCormick Distinguished Service Professor of Finance, University of Chicago - Finance

STEPHEN FIGLEWSKI
Professor of Finance, New York University - Stern School of Business

STUART I. GREENBAUM
Bank of America Professor of Managerial Leadership, Washington University in St. Louis - Olin Business School

MICHAEL C. JENSEN
Co-Founder, Chairman, Managing Director and Integrity Officer, SSRN, Jesse Isidor Straus Professor of Business Administration, Emeritus, Harvard Business School, Research Associate, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI), Harvard University - Accounting & Control Unit

JONATHAN M. KARPOFF
Washington Mutual Endowed Chair in Innovation Professor of Finance, University of Washington - Michael G. Foster School of Business

KENNETH LEHN
Professor of Business Administration, University of Pittsburgh - Finance Group

STANLEY R. PLISKA
University of Illinois at Chicago - Department of Finance

CHARLES I. PLOSSER
President, Federal Reserve Bank of Philadelphia, National Bureau of Economic Research (NBER)

KATHERINE SCHIPPER
Duke University - Fuqua School of Business

ALAN SCHWARTZ
Sterling Professor of Law, Yale Law School

G. WILLIAM SCHWERT
Distinguished University Professor of Finance and Statistics, University of Rochester - Simon Business School, National Bureau of Economic Research (NBER)

RENE M. STULZ
Everett D. Reese Chair of Banking and Monetary Economics, Ohio State University (OSU) - Department of Finance, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

ROSS L. WATTS
Erwin H. Schell Professor of Management, Massachusetts Institute of Technology (MIT) - Sloan School of Management