banking & finance monitor N.2 DECEMBER 2007 Focus What is the rationale for rule banks? Franklin Allen (University of Pennsylvania) and Elena Carletti (Center for Financial Studies at the University of Frankfurt) 1 In recent decades in that respect has been remarkable de ordinance in many industries. A arena that trunk heavily correct is banking. Why is this? In this hold we bespeak that current banking standard is the result of a era of reactions to historic events. Given that it is non designed to solve any peculiar(prenominal) problem, it is non web that it is very effective. In what follows, we identify two consequential food market visitations that can justify intervention. Why is banking so heavily correct? In recent decades thither has been significant de normal in many industries. A sector that remains heavily regulate is banking. Why is this? One reason is consumer security measure but this is comparatively minor. The main reason for banki ng regulation is to hold financial crises. However, banking regulation is unusual compared to former(a) types of regulation in that there is non wide agreement on what the market failure is that justifies regulation. With some other types of regulation there typically is agreement.
For example, antitrust regulation is essential to prevent the pernicious effects of monopoly. The market failure is the add out of competition. With environmental regulation, there is a missing market. Polluters do not go to pay a price to indemnify the good deal they harm. If there was a market where they did have to do this ther e would be an efficient allocation of resour! ces and no need for intervention. exclusively there isnt such a market and it is unavoidable to regulate instead. In contrast, with banking what is the market failure that justifies so much regulation? In this article we argue that current banking regulation is the result of a sequence of reactions to historical events. Given that it is not designed to solve any particular problem, it is...If you want to pass a full essay, order it on our website: OrderCustomPaper.com
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