Description
Vast change has characterized the financial services industry over the past two decades, creating trends. provoking scandal, and spurring innovation that will continue to mold the industry. This timely volume surveys these changes, their influence on the various sectors of the financial services industry, and the challenges and opportunities they will pose to managers in the twenty-first century.
Deregulation is probably the most controversial and complicated issue facing the industry, and several articles here explore its recent effects. A fascinating case study of Bank of America by Richard H.K. Vietor shows how deregulation in the early 1980s-and the ensuing competition-exposed the bank's stubborn inefficiencies, poor credit management, outmoded technology. and high fixed costs. The initial decline and subsequent turnaround of this commercial bank spotlights the imperatives for financial market competition in the coming decade.
The thrifts were not as fortunate in overcoming regulation. A telling study on the thrift crisis by Carliss Y. Baldwin and Benjamin C. Esty examines how careless regulatory efforts provided incentives to engage in the higher-risk, higher-reward practice of "securitizing" assets, leading to the failure of over 1,400 thrifts. Well- chronicled in the media, this scandal exposed the moral hazard and adverse selection problems that resulted from a haphazardly deregulated environment: this essay offers lessons for how regulators and industry can work together in the future. Examining a finer detail that emerged from this controversy, Robert C. Merton and Andrรฉ F. Perold offer a new framework for determining capital adequacy, one that reflects the increasing complexity of the financial world.
ISBN: 9780875844022
