by Summary:
Large bank corporations now tend to have both traditional lending divisions as well as securities market divisions. This was not always the case; regulators used to keep financial firms locked to specialisations — this was referred to as “the pillar system” in Canada. However, ongoing deregulation eroded the pillars — I discuss part of the economic logic below. It is possible to find banks that stick to a traditional loan/deposit structure (particularly in the United States, with a highly fragmented banking system), but those banks tend to be smaller.Editorial note: This is possibly the last of my series of articles on the theme “how do banks work?” These articles would end up as a chapter in my banking primer. The “elevator pitch” for my book is that I want to pour cold water on loopy
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Large bank corporations now tend to have both traditional lending divisions as well as securities market divisions. This was not always the case; regulators used to keep financial firms locked to specialisations — this was referred to as “the pillar system” in Canada. However, ongoing deregulation eroded the pillars — I discuss part of the economic logic below. It is possible to find banks that stick to a traditional loan/deposit structure (particularly in the United States, with a highly fragmented banking system), but those banks tend to be smaller.Editorial note: This is possibly the last of my series of articles on the theme “how do banks work?” These articles would end up as a chapter in my banking primer. The “elevator pitch” for my book is that I want to pour cold water on loopy
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Mike Norman considers the following as important:
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Large bank corporations now tend to have both traditional lending divisions as well as securities market divisions. This was not always the case; regulators used to keep financial firms locked to specialisations — this was referred to as “the pillar system” in Canada. However, ongoing deregulation eroded the pillars — I discuss part of the economic logic below. It is possible to find banks that stick to a traditional loan/deposit structure (particularly in the United States, with a highly fragmented banking system), but those banks tend to be smaller.Editorial note: This is possibly the last of my series of articles on the theme “how do banks work?” These articles would end up as a chapter in my banking primer. The “elevator pitch” for my book is that I want to pour cold water on loopy fractional reserve banking stories — which requires some discussion of how banks operate in the real world. However, I am certainly not aiming to write a manual on how to operate a bank, or even how to be a bank analyst. Instead, the focus is how banks fit into the macroeconomy, which requires some knowledge of the basic strategies banks follow....
Bond Economics
Brian Romanchuk