Separation Of Commercial Banking Research Articles

Separation of Investment Banking and Commercial Banking: Implication for Public Interest and Confidence

The purpose of this paper is to critically examine existing literature on separation of commercial banking activities from investment banking activities in order to advise whether the commercial and investment banking activities should be combined or separated. Introduction of new regulation in the wake of global financial crisis bring with it additional operating cost to operators of the financial sectors. While supervising plethora of regulations by central banks becomes difficulty and in the end nothing is achieve from it. The paper identified the causes of the global financial crisis that commenced in the mid-2007 as a result of global financial imbalance; long period of low interest rates in the advanced economies; consumer failure to monitor for themselves; managers compensation schemes encouraged risk-taking; skewed incentives of the rating agencies and finally, the limitation of risk measurement and regulation. These reasons contributed to the global financial crises and not the repealed Glass-Steagall Act. The study concluded that the repealed of the Act did not cause the global financial crisis in 2007 but was rather due to inadequate supervision by the regulators. The study adopts content analysis to assess the risks associated with combining the two operations together and those who posit that the combination should be separated and those in favour of it. The study professed some recommendations that will protect public interest and private capital while carrying out combined operations of commercial banking and investment banking activities.

The Global Credit Crisis: Why Have Australian Banks Been So Remarkably Resilient?

This paper identifies a number of key factors that explain the remarkable resilience of the Australian banking sector in the face of the Global Financial Crisis, with a view to gleaning lessons for other countries' banking systems. It is argued that in Australia a culture of prudent lending prevails: banks are soundly capitalised, with a well-diversified and stable funding base, and with a track record of healthy profitability. The industry is independently recognised for its sound corporate governance, and official oversight of banks is diligent. Importantly, the separation of commercial banking from social-assistance policy has been maintained, unlike in the US.