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Discuss whether there is a need for the dual banking system, given the current state of computer and telecommunication technological capabilities.

The dual banking system develops a healthy dynamic between regulators, making a broader product and service range available to the consumers. It means low regulatory costs and improved supervision as well. The notion of providing banks with an option to choose either national or state charter has continued to remain viable because it has been successful in creating a relative competitive parity amongst the two charters. The improved level of computer and telecommunication technologies today in fact heighten competition and improve innovation between the banks, which is a good thing. Several innovative, commonplace services and products of today such as mortgages with variable rates, transaction accounts that bear interest, home equity loans, and the checking account, along with the expansion of insurance powers, securities, and activities related to mutual funds are actually the products of flexibility and competition aspects that the dual banking system has been successful in fostering. If there is a significant shift in the competitive balance, then the states or the Congress intervenes to maintain the balance.

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Regulation in the banking industry is unfair and unnecessary in a free market economy. Discuss and debate the statement.

State and federal agencies regulate practically every banking aspect, with different agencies regulating different kinds of banks. A branch of United States treasury called the Comptroller of the Currency regulates national banks; the Federal Reserve regulates bank-holding firms; the State Banking Commissioner regulates state-chartered institutions; and other regulators manage loan and saving banks. It is true that while some regulations work efficiently to maintain the system in a running state, some don't and end up causing more damage than good. It is still true however that the banking industry needs regulation, considering the long history of failures in the banking industry owing to bad baking decisions; serious infringement of laws; mismanagement of residential mortgage loans and commercial real estate loans; and debts related to credit card usage. Regulations work towards preventing banking industry failures, encouraging foreign investments, and most importantly building a sense of trust in the minds of the consumers, making them invest and maintain a steady flow of money which in-turn keeps the American economy in good health.

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Discuss the major reasons for mergers in the banking industry. Also provide a list of major mergers taking place in the last five years. How do these mergers impact customers, and the banking industry? Are they beneficial to the industry, or are they creating a monopolistic situation?

Numerous economic factors such as improving cost efficiency through increased size, introducing and maintaining technologies that consumers demand, creating interstate banking and branching opportunities, diversification, and wider product range for consumers are some of the key reasons why mergers take place in the banking industry.

List of major bank mergers in the U.S in the past 5 years

|Year |Acquirer |Acquired Bank |Merged Entity |

|2004 |New Haven Savings Bank |Savings Bank of Manchester, |NewAlliance Bank |

| | |Tolland Bank | |

|2004 |Bank of America Corp. |FleetBoston Financial Corp. |Bank of America Corp. |

|2004 |J.P. Morgan Chase & Co. |Bank One |JPMorgan Chase & Co. |

|2004 |Banco Popular |Quaker City Bank |Banco Popular |

|2004 |Regions Financial |Union Planters Corporation |Regions Financial Corporation |

| |Corporation | | |

|2004 |SunTrust |National Commerce Financial |SunTrust |

|2004 |Wachovia |SouthTrust |Wachovia |

|2005 |Capital One Financial |Hibernia National Bank |Capital One Financial Corporation |

| |Corporation | | |

|2005 |Bank of America |MBNA Corporation |Bank of America Card Services |

|2006 |Wachovia |Westcorp Inc. |Wachovia |

|2006 |NewAlliance Bank |Cornerstone Bank |NewAlliance Bank |

|2006 |Capital One Financial |North Fork Bank |Capital One Financial Corporation |

| |Corporation | | |

|2006 |Wachovia |Golden West Financial |Wachovia |

|2006 |Regions Financial |AmSouth Bancorporation |Regions Financial Corporation |

| |Corporation | | |

|2007 |Citizens Banking |Republic Bancorp |Citizens Republic Bancorp |

| |Corporation | | |

|2007 |Banco Bilbao Vizcaya |Compass Bancshares |Banco Bilbao Vizcaya Argentaria |

| |Argentaria | | |

|2007 |Bank of America |LaSalle Bank |Bank of America (Purchase Currently on hold due to |

| | | |LaSalle Bank's parent company ABN AMRO currently in the |

| | | |process of being bought |

|2007 |State Street Corporation |Investors Financial Services |State Street Corporation |

| | |Corporation | |

|2007 |Bank of New York Company, |Mellon Financial Corporation |Bank of New York Mellon |

| |Inc. | | |

|2007 |Wachovia |World Savings Bank |Wachovia |

|2007 |Wachovia |A.G. Edwards |Wachovia |

|2008 |JPMorgan Chase |Bear Stearns |JPMorgan Chase |

|2008 |Bank of America |Merrill Lynch |Bank of America |

|2008 |JPMorgan Chase |Washington Mutual |JPMorgan Chase |

|2008 |Wells Fargo |Wachovia |Wells Fargo |

|2008 |5/3 Bank |First Charter Bank |5/3 Bank |

|2008 |PNC Financial Services |National City Corp. |PNC Financial Services |

Source of the above list:



Local-level data from the Federal Reserve indicates that in the recent years mergers have increased competition in the market, so it means that there isn’t a realistic threat of a monopolistic situation currently; however, the fact still is that an increased number of mergers can mean lesser competition. Studies suggest that mergers in fact encourage the creation of new banks. The level of impact of mergers varies widely on consumers. Changed account numbers, changed checks, and changed fee schedules can create hassles for a consumer whose branch has been acquired by another bank. Such situations can create inconvenience and anxiety in consumers; however, banks anticipate these issues and make elaborate efforts to smooth the transition and retain customers.

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