Relaxing Glass-Steagall provisions: Wealth and risk effects on foreign banks and their domestic corporate customers.
We provide evidence that expanding the permissible scale of Bank Holding Company (BHC) securities activities in the US redistributes wealth from foreign banks and their domestic customers to domestic BHCs. However, removing prudential interaffiliate firewalls to permit BHCs to freely pursue synergies from the joint performance of banking and securities activities results in wealth losses for all interest groups. Securities activity deregulation increases the systematic risk for the foreign bank sector. Our evidence highlights that the application of the US regulatory policy of national treatment, which seeks to provide equality of competitive opportunity to foreign banking institutions operating in domestic markets, results in competitive inequities.
Narayanan, R.P., Rangan, N.K. & Sundaram, S. (2003). Relaxing Glass-Steagall provisions: Wealth and risk effects on foreign banks and their domestic corporate customers. Journal of Multinational Financial Management, 13, 465-482. doi: 10.1016/S1042-444X(03)00021-5
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