Safe and Sound Banking: Past, Present, and Future

Jointly sponsored by the Federal Reserve Banks of San Francisco and Atlanta and the founding editors of the Journal of Financial Services Research

Federal Reserve Bank of San Francisco

In 1986, a task force of five banking academics organized and sponsored by the American Bankers Association convened to examine the banking industry and the efficacy of its regulatory system. The group was charged with reviewing “the problems of ensuring the safety and soundness of the banking system and looking at a number of policy options to improve the efficiency, performance, and safety of the system by changing the structure of the deposit insurance system and the bank regulatory and supervisory process.”

The report, published by the MIT Press as the book Perspectives on Safe and Sound Banking, focused almost entirely on depository institutions. At the end of the report, the task force presented a menu of principal options and recommendations. Topics covered included

• Deposit insurance and lender of last resort—Many changes were suggested in structure, coverage, the handling of failing institutions, etc.
• Market discipline—Increased reliance on the market was suggested to discipline institutions, managers, and stockholders for undue risk taking and to urge the adoption of subordinated debt requirements, use of current value measures of capital, and increased disclosure.
• Examination and supervisory reforms—Suggestions included regulatory agency reform and the creation of competing insurance agencies.
• Insurance agencies—Suggestions were made to monitor fund flows and rates and limit deposit insurance coverage.
• Expanded powers—Changes were suggested in the criteria for approving new powers.
• Additional concerns included international cross-border regulatory and supervisory issues, pricing of deposit insurance, treatment of foreign branches in the United States, and the importance of self-regulation.

The purpose of this conference is to evaluate how these recommendations have fared during the past twenty years: How many have been adopted in one form or another, how many have been rejected, and how many are still under consideration? The conference will also update the menu of recommendations to deal with the challenges confronting the banking system over the next twenty years.

Agenda

Agenda Download (PDF – 15KB)