Conference Presents 20 Years' Perspective on Safe and Sound Banking
"Banking is now, and has always been, a risky business." This cautionary statement was the first sentence of the executive summary of Perspectives on Safe and Sound Banking: Past, Present, and Future, a book written in 1986, when the U.S. economy was suffering some turbulence and the bank regulatory framework was showing signs of strain. The book's five authors were commissioned by the American Bankers Association to assess and recommend policy options to improve the banking system's efficiency, performance, and safety. The five academic consultants came to a consensus on policy options and recommendations, which have in many ways served as a blueprint for the changes in banking's regulatory framework that have occurred in the 20 years since the book's publication.
A conference last year titled "Safe and Sound Banking: Past, Present, and Future," cosponsored by the Federal Reserve Banks of Atlanta and San Francisco and the founding editors of the Journal of Financial Services Research, paid homage to this seminal work. The purpose of the conference was to evaluate whether—and how—the 1986 report's recommendationshave been implemented, to assess the current state of the banking industry, and to update the menu of recommendations to address the challenges confronting banking during the coming years.
A recent issue of the Atlanta Fed's Economic Review presents the conference papers, commentaries, and discussions, which represent the views of experts, including the five economists who wrote the 1986 report.
Looking at the road traveled
Looking at risk challenges
DeYoung's strategic analysis of the current state of the industry compares the "transactions banking" business model practiced by large financial companies to the more traditional relationship-based banking business model. In particular, the author focuses on the different production technologies, product mixes, strategic behaviors, and risk-return trade-offs that characterize these two opposite approaches. In closing, he discusses what these new developments may mean for the industry's ongoing safety and soundness.
Looking at the overlooked
Looking back—and ahead
June 15, 2007