FDICIA after five years: a review and evaluation

At yearend 1991, Congress enacted fundamental deposit insurance reform for banks and thrifts in the FDIC Improvement Act (FDICIA). This reform followed the failure of more than 2,000 depository institutions in the 1980s. Many of these failed because of the incentive incompatibility of the structure of federal government-provided deposit insurance, which encouraged moral hazard behavior by banks and poor agent behavior by regulators. Insurance was put on a more incentive compatible basis by providing for a graduated series of sanctions that mimic market discipline and first may and then must be applied by the regulators on floundering the banks. This article reviews these changes and evaluates the early results.Federal Deposit Insurance Corporation Improvement Act of 1991

Deposit insurance reform in the FDIC Improvement Act: the experience to date

In 1991, the U.S. adopted fundamental deposit insurance reform in the FDIC Improvement Act. This article reveals why such reform was necessary in light of the severe banking crisis of the 1980s and analyzes its success to date.Federal Deposit Insurance Corporation Improvement Act of 1991

Consumer credit information systems: A critical review of the literature. Too little attention paid by lawyers?

This paper reviews the existing literature on consumer credit reporting, the most extensively used instrument to overcome information asymmetry and adverse selection problems in credit markets. Despite the copious literature in economics and some research in regulatory policy, the legal community has paid almost no attention to the legal framework of consumer credit information systems, especially within the context of the European Union. Studies on the topic, however, seem particularly relevant in view of the establishment of a single market for consumer credit. This article ultimately calls for further legal research to address consumer protection concerns and inform future legislation

Financial Legislation: The Promise and Record of the Financial Modernization Act of 1999

On November 12, 1999, President Clinton signed the most significant piece of financial services regulation to be enacted since the Great Depression, at least up to that time. When the Financial Service Modernization Act of 1999, better known as the Gramm-Leach-Bliley Act (GLBA), was signed, the financial services industry faced strong pressures for deregulation of the rigid structure imposed during the Great Depression. During the 2007-08 financial crises and ensuing debate regarding financial services regulation, the GLBA became a target as members of the financial sector, academia and government considered possible triggers that may have precipitated the crisis

Stock Exchanges and Issuers: A Changing Relationship

The nature of the relation between stock exchanges and firms seeking a listing has changed considerably over the past decades. In this paper, we argue that the relationship has lost most of its historic complexity and has almost been reduced to a standardized contract in the sense that there are few contractual properties distinguishing listing on different exchanges apart from granting access to a specific liquidity pool. Analyzing the actual specifications of listing agreements at five major stock exchanges, we demonstrate that the contractual features are converging towards a standardized agreement. Furthermore, we show that some of the functions formerly fulfilled by exchanges are now performed by other institutions. We analyze whether these changes are reflected by policy makers in their efforts to create integrated European capital markets.Die Beziehung zwischen Börsen und Eigenkapitalemittenten hat sich in den vergangenen Jahrzehnten fundamental verändert. In diesem Beitrag argumentieren wir, dass diese Beziehung einer standardisierten Vertragsbeziehung gleicht, die ihre historische Komplexität weitgehend verloren hat. Während Börsen in der Vergangenheit unterschiedlich gestaltete Listinganforderungen an Unternehmen gestellt und durchgesetzt haben, ist heute ihr wesentliches Differenzierungsmerkmal die Liquidität der gehandelten Aktien. Eine Untersuchung der Listinganforderungen von fünf bedeutenden Börsen zeigt, dass die wichtigsten Vertragsbestandteile des Abkommens zwischen Emmittent und Börse weitgehend vereinheitlicht sind. Wir zeigen weiterhin, dass neue Institutionen wie etwa nationale Börsenaufsichtsbehörden einige der früher von Börsen wahrgenommenen Aufgaben übernommen haben. Abschließend untersuchen wir, ob und in welchem Maße diese Veränderungen in den gegenwärtigen Bemühungen zur Schaffung integrierter europäischer Kapitalmärkte berücksichtigt werden

A Research Note on the Relationship between Regulation and Audit Firm Size on Audit Fees

This study represents an initial attempt to examine some specific factors that might lead to large firms' economies of scale. Multiple regression analysis is used to test hypotheses concerning scale opportunities conferred on large CPA firms in dealing with regulatory complexity faced by the client. An analysis of interaction between audit firm size and variables measuring client regulatory complexity shows that audit fees are lower for all firms in regulated industries compared to nonregulated industries—the difference being much greater, however, for Big Eight (now Big Six) firms, and audit fees charged by Big Eight firms are much lower when the auditor is involved with client security registrations. This relationship does not hold true for non-Big Eight firms involved with client registration statements. Based on these results, it appears that client regulatory complexity confers greater scale opportunities to larger audit firms compared to smaller ones.Yeshttps://us.sagepub.com/en-us/nam/manuscript-submission-guideline

The Repeal of the Glass-Steagall Act and the Federal Reserve's Extraordinary Intervention During the Global Financial Crisis

Before the global financial crisis, the assistance of a lender of last resort was traditionally thought to be limited to commercial banks. During the crisis, however, the Federal Reserve created a number of facilities to support brokers and dealers, money market mutual funds, the commercial paper market, the mortgage-backed securities market, the triparty repo market, et cetera. In this paper, we argue that the elimination of specialized banking through the eventual repeal of the Glass-Steagall Act (GSA) has played an important role in the leakage of the public subsidy intended for commercial banks to nonbank financial institutions. In a specialized financial system, which the GSA had helped create, the use of the lender-of-last-resort safety net could be more comfortably limited to commercial banks. However, the elimination of GSA restrictions on bank-permissible activities has contributed to the rise of a financial system where the lines between regulated and protected banks and the so-called shadow banking system have become blurred. The existence of the shadow banking universe, which is directly or indirectly guaranteed by banks, has made it practically impossible to confine the safety to the regulated banking system. In this context, reforming the lender-of-last-resort institution requires fundamental changes within the financial system itself