Summary and Conclusions
In the 1980s, the U.S. experienced its worst bank problems since the Great Depression. The problems occurred despite an elaborate bank regulatory structure. The obvious conclusion is that the existing structure was not appropriate for fulfilling its assigned responsibilities. Although banking institutions are now in overall good financial condition and bank regulation has been significantly improved, there is still an ongoing debate over the exact way in which to “modernize” the legal definition of a bank. Perhaps the most important lesson from the recent past in the U.S. is that the most appropriate way for all countries to proceed is by viewing banks not in isolation, but instead as an integral part of a much larger financial system. And a financial system that is increasingly global in nature and constantly evolving in response to new developments. Such a broader perspective suggests that relying less on extensive bank regulation and more on market discipline is the best way to proceed.