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Risk-based capital standards presume a need for common capital
standards across countries. The details of forging an agreement
were left to the staffs of the primary bank regulators in each
country, and compromises were inevitable. Although domestic
constituencies' reactions to the proposals were invited, the
arduous negotiations that led to the proposals generated intense
pressure on the principals not to make changes. The European
Community's approach to financial integration seems to be driven by
a political desire to achieve an integrated market within Europe,
despite significant institution al differences among countries.
Underlying that desire is a belief that the market pressures that
result from different regulatory systems operating in the same
market will produce the right answer . The financial provisions of
the U .S.-Canada free-trade agreement take a direction that, in my
judgment, is more productive. The provisions are more limited in
scope than are those of the European initiative. National treatment
and national sovereignty are preserved. However, the delicate issue
of national responsibility for failing institutions, and its
relationship to monetary policies, is not addressed. A Better
Alternative A productive basis for international regulation can be
formulated around three principles: 1. free entry for foreign-owned
subsidiaries chartered under the laws of the host country; 2.
national treatment for those subsidiaries; and 3. national
responsibility for (a) monetary policy, (b) prevention of
unwarranted financial panics in domestically chartered
institutions, whether foreign or domestically owned, and (c)
supervision of all domestically chartered institutions, regardless
of ownership.
Risk-based capital standards presume a need for common capital
standards across countries. The details of forging an agreement
were left to the staffs of the primary bank regulators in each
country, and compromises were inevitable. Although domestic
constituencies' reactions to the proposals were invited, the
arduous negotiations that led to the proposals generated intense
pressure on the principals not to make changes. The European
Community's approach to financial integration seems to be driven by
a political desire to achieve an integrated market within Europe,
despite significant institutional differences among countries.
Underlying that desire is a belief that the market pressures that
result from different regulatory systems operating in the same
market will produce the right answer. The financial provisions of
the U.S.-Canada free-trade agreement take a direction that, in my
judgment, is more productive. The provisions are more limited in
scope than are those of the European initiative. National treatment
and national sovereignty are preserved. However, the delicate issue
of national responsibility for failing institutions, and its
relationship to monetary policies, is not addressed. A Better
Alternative A productive basis for international regulation can be
formulated around three principles: 1. free entry for foreign-owned
subsidiaries chartered under the laws of the host country; 2.
national treatment for those subsidiaries; and 3. national
responsibility for (a) monetary policy, (b) prevention of
unwarranted financial panics in domestically chartered
institutions, whether foreign or domestically owned, and (c)
supervision of all domestically chartered institutions, regardless
of ownership.
In Chapter 5, William Shughart also considers the part that
politics played in banking legislation during the 1930s, but he
looks at the banking legislation passed in the United States.
Shughart draws par ticular attention to the provisions in the
Banking Act of 1933 that required the separation of commercial and
investment banking activ ities. Applying a public choice analysis,
Shughart asks who gained from the provisions, and he concludes that
the commercial banking industry, the investment banking industry,
and the U. S. Treasury Department can all be said to have benefited
in the years immedi ately following the passage of the act. Richard
Timberlake, in his comment, extends Shughart's analysis to show how
the federal gov ernment manipulated the monetary policy of the
1930s for its own benefit. The history of the regulation of the
savings and loan industry is the subject of Chapter 6. James Barth
and Martin Regalia examine the way in which regulation of the
industry has evolved since the first savings and loan was
established in the 1830s. They conclude that the stated purpose of
regulation appears to have changed, even while the regulations
themselves often have not. Barth and Regalia provide some important
insights into the contribution of thrift regu lation to the current
problems facing the indusb-y as well as some suggestions about the
direction reform should-and should not take."
Risk-based capital standards presume a need for common capital
standards across countries. The details of forging an agreement
were left to the staffs of the primary bank regulators in each
country, and compromises were inevitable. Although domestic
constituencies' reactions to the proposals were invited, the
arduous negotiations that led to the proposals generated intense
pressure on the principals not to make changes. The European
Community's approach to financial integration seems to be driven by
a political desire to achieve an integrated market within Europe,
despite significant institution al differences among countries.
Underlying that desire is a belief that the market pressures that
result from different regulatory systems operating in the same
market will produce the right answer . The financial provisions of
the U .S.-Canada free-trade agreement take a direction that, in my
judgment, is more productive. The provisions are more limited in
scope than are those of the European initiative. National treatment
and national sovereignty are preserved. However, the delicate issue
of national responsibility for failing institutions, and its
relationship to monetary policies, is not addressed. A Better
Alternative A productive basis for international regulation can be
formulated around three principles: 1. free entry for foreign-owned
subsidiaries chartered under the laws of the host country; 2.
national treatment for those subsidiaries; and 3. national
responsibility for (a) monetary policy, (b) prevention of
unwarranted financial panics in domestically chartered
institutions, whether foreign or domestically owned, and (c)
supervision of all domestically chartered institutions, regardless
of ownership.
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