The Economic Consequences of Financial Institution Structural Changes

Abstract

There have been a lot of discussions about a more competitive and efficient financial system through the removal of regulations governing the financial institutions.

The regulations on financial institutions have been justified on the ground that those regulations will enhance safety of depositors and prevent an excessive competition among financial institutions. However, it is generally agreed that the lack of competition, inefficiency, disintermediation, and deteriorating performance of institutions are the results from the unwarranted regulations on financial institutions. Several government studies also recommended unanimously the removal of all these regulations which impair the free competition among the institutions as the only solution for the efficiency and survival of financial system.