Please enable JavaScript.
Coggle requires JavaScript to display documents.
Lecture 2 (The structure of US banking (including (Bank holding companies,…
Lecture 2
The structure of US banking
Commercial banking is the dominant supplier of credit and payments services to businesses and households
The structure of US banking industry is unique as it contains some of the world's largest financial service organisations but also some the smallest
It also has a larger number of individual banks than most countries and much less concentrated market with the largest bank holding less than 10% market share.
including
money centre banks
advantages
Better diversification – both geographically and by product line
Able to raise huge amounts of financial capital at relatively low cost
Well positioned and can attract top managerial talent and technology
Better placed to withstand the risks of a fluctuating economy
community banks
unit banking
These are banks that operate
effectively from ‘one office’.
Branch banking
More recently, bank branch expansion has slowed with banks seeking to replace brickand-mortar branches with technology (internet banking, ATMs, POS terminals, call centres)
Bank holding companies
A bank holding company (BHC) is a corporation chartered to hold the stock of at least one bank, often along with other businesses.
BHC also allow greater access to capital market funding
and potentially higher leverage (more diversification)
too rapid expansion or expansion into a new area or non-bank services may overstretch BHC management and their performance suffer accordingly
BHC may result in greater market concentration and, via market power, reduce competition. Their focus may also be directed at larger and more profitable clients and so small businesses in rural areas may not be served.
Financial holding companies
FHCs differ from BHCs as they can cover the broadest range of financial services, including dealing in and underwriting securities and selling and underwriting insurance
The structure of Japanese banking
Private deposit-taking institutions
Private non-deposit-taking institutions
Public financial institutions
The structure of European banking
Smaller banks are consolidating into larger ones, converging with securities, insurance, and other financial-service industries, and crossing national boundaries
Consolidation has led to a small number of banks having dominant positions in various banking markets and with it concerns over these large and complex banking groups (LCBGs)
Bank versus market finance
Keys to good financial sectors
Financial markets
FX, bond, derivatives, shares
Financial access
commercial and retail access
Non‐banking financial services
IPOs, M&As,
insurance, and securitisation
Banking system services
size, efficiency and
disclosure
Financial stability
currency, banking &
sovereign risks国家风险
Business environment
human capital, taxes,
infrastructure, business costs
Institutional environment
legal and regulation,
contract enforcement, corporate governance
Comparing financial systems
Separation of regulation
Financial regulation was once conducted on a functional basis. Banks were regulated by a bank regulator, insurance by an insurance regulator, and securities dealers by a securities industry regulator.
Separation of central bank access
In a financial crisis, access to the central bank s liquidity support may become critical to a financial institution’s survival
Separation of different financial services
Most countries initially limited banking services such as cheque accounts and clearing to authorised banks.
Separation of government versus private
sector ownership
private banks only interest in the more profitable business clients. Serving households and small businesses was not so attractive.
government responses saw the creating of government banks in development finance, agricultural finance, housing finance, and export finance or conjunction with the post office
Separation of banking and commerce
Most regulators now considered such commerce and banking combinations as risky and required their separation
Bank versus market lead financial sectors
bank dominated fin sectors
The German and Japanese
Investors save primarily through bank deposits and corporates raise most of their external equity and debt funding (loans and bonds) through bank investments.
market dominated systems
Banks remain important but are not the sole providers. They are limited more to short to medium term finance
Securities markets intermediation is more important. The USA and UK are examples
The structure of Chinese banking
3 policy banks
5 large commercial banks,
12 joint stock commercial banks
133 city commercial banks
5 private banks
859 rural commercial banks
71 rural cooperative banks
1,373 rural credit cooperatives (RCCs)
1 postal savings bank