Financial Modernization: Vastly Different or Fundamentally
Business Review--Federal Reserve Bank of (08/00) Vol. 13, No. 8 p.3; Boehne, Edward G.

Edward G. Boehne, president of the Federal Reserve Bank of Philadelphia, examines five questions about banking industry trends as they relate to the implementation of the Financial Services Modernization Act. With the Gramm-Leach-Bliley Act now on the books, Boehne says the future of the banking industry in terms of its regulatory structure remains an unsettled issue. Questions such as will ongoing consolidation in the financial system and the ability of banks to expand into new product markets lead inevitably to financial supermarkets?; will banking become primarily e-banking?; will bank products be purchased and sold in the financial marketplace as commodities, or will personal service and personal contact still matter?; will the major focus of the business of banking become the collection of fee income instead of the margins on loans?; and will bank regulators eventually rely primarily on market discipline instead of on more traditional bank examinations to determine the health of banks?, still need answers. Boehne asserts that past and current trends, combined with the recent passage of Gramm-Leach-Bliley, will in all likelihood forever change the structure of the financial system and the delivery systems used by banks to provide customer service, as will technological changes, which have prompted banks to become larger. At the same time, Boehne believes that the financial system will remain the same because public confidence will always be the cornerstone of the system. How these trends shape up will depend largely on how banks, nonbanks, regulators, and legislators handle sharing the responsibility of overseeing the new system.

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