Vol. 92, Nos. 1 and 2
First and Second Quarters 2007
Safe and Sound Banking Twenty Years Later: What Was Proposed and What Has Been Adopted
This article assesses the extent to which changes in public policy regarding depository institutions have aligned with the recommendations made twenty years ago in Perspectives on Safe and Sound Banking (Benston et al. 1986). Several legislative initiatives and bank regulatory and supervisory changes during the past two decades have been in keeping with Benston and his coauthors' recommendations and analyses. But other recommendations in the book have not been followed, and some proposals the book rejected have been enacted through legislation or regulation.
The article focuses in turn on Benston et al.'s principal recommendations and then discusses and analyzes subsequent related legislative, regulatory, and supervisory developments.
Policies and Prescriptions for Safe and Sound Banking: Shocks, Lessons, and Prospects
(A corrected version of this commentary was posted on May 9, 2007. Files downloaded before that date contain an error in Figure 2, page 27. We apologize for any inconvenience this error may have caused.)
James A. Wilcox
The author illustrates the extent to which ensuing regulatory changes conform to the prescriptions of Perspectives on Safe and Sound Banking. He probes whether relatively untested regulatory strictures, such as prompt corrective action, will prevail when banking is heavily stressed. He then discusses how "home-run regulation" extends the reach of individual states' bank charters nationwide and whether the Fed will eventually regulate financial institutions marketwide.
Market and Risk Management Innovations: Implications for Safe and Sound Banking
Eric S. Rosengren
This commentary reviews three of the major innovations suggested in Benston et al. (1986): movement toward greater risk-sensitive approaches, an enhanced role for market discipline and disclosure, and earlier intervention for troubled banks. The author then discusses environmental changes that may not have been anticipated two decades ago and some implications for bank supervision and regulation.