Economic Review, Vol. 92, Nos. 1 and 2, 2007
Download the full text of this article 
In 1986 the American Bankers Association asked five banking academics to assess and recommend policy options to improve the banking system's efficiency, performance, and safety. The report these five economists produced, Perspectives on Safe and Sound Banking: Past, Present, and Future, has in many ways served as a roadmap for ensuing bank regulatory reforms. In this roundtable discussion, each of the five authors reflects on the past twenty years and the current status of the banking industry and, in some cases, shares thoughts about the industry's future direction.
Looking Back Twenty Years: What Changed,
What We Wrote, and What We Did and Did Not Accomplish
George J. Benston
Since 1986 the U.S. banking industry has seen several important changes, some anticipated in Perspectives on Safe and Sound Banking and others not. The author considers how some of the book's original recommendations have fared.
Hindsight and Foresight about Safe and Sound Banking
Robert A. Eisenbeis
The author reviews the banking industry issues discussed in the 1986 report and delineates those that were, in hindsight, overemphasized, those that were underemphasized, and those that were not fully appreciated but subsequently turned out to be important. He also highlights issues that should be the focus of agendas for the future.
The Minimum Requirements for Safe and Sound Banking
Paul Horvitz
Appropriate banking regulatory policy, the author contends, rests on three principles: a meaningful capital requirement, a good method of monitoring compliance with that requirement, and a closure rule to be enforced when the capital requirement is not met.
The Etiology of Financial Instability: Then and Now
Edward J. Kane
The "complexification," within and across countries, of financial instruments, institutions, and risk-management strategies is creating an increasingly nontransparent environment for shifting risks onto national safety nets. The author argues that designing and testing protocols for resolving the insolvency of large multinational financial organizations is the most urgent problem facing regulators today.
Some Further Thoughts about the Road to Safer Banking
George Kaufman
As he reviewed the recommendations for the banking industry in Benston et al. (1986), this author now found himself not in agreement with some of them. For instance, he is not now enamored with risk-related ex ante FDIC deposit insurance premiums or with risk-based capital requirements.
April 2007