Financial regulation

Author: Jackson Howell E.
Publisher:
Publish Date: 2003-09-01
Features: [Excerpt:] The excerpt bank is an industry that requires regulation, and based on a thorough consideration of the public interest, we have implemented a policy of entry restrictions for this industry. However, we should not interpret the norms for entry as setting up barriers to entry. Controlling the establishment of new banking institutions and increasing the costs of existing ones is not intended to create an insurmountable obstacle for the creation of new entities in this industry. Instead, it provides a foundation for appropriate restrictions based on the public interest. So, in the context of the expansion of banking institutions and the public interest, what standards should be used to make appropriate judgments? Two basic principles should be followed. Our understanding must be consistent with the facts—the fact that our economy is a dynamic and growing tool. For its development, there is a need for sufficient regulation of banking institutions. Our needs are changing, and our banking institutions must also adapt to these evolving needs. Our second consideration relates to coordination and cooperation—we must evaluate private efforts in the expansion of banking institutions. In the vast non-regulated areas of our economic system, we rely entirely on private entrepreneurial behavior, which determines the requirements for bearing new risks. Through antitrust laws, we strive to maintain complete freedom of entry, allowing this liberty to endure. Some believe that we can safely implement this policy in the banking industry. The Sakon concept has a significant impact on the issuance of banking licenses. When Sakon took office in 1961, he publicly expressed his hope to receive more license applications. Between 1962 and 1964, a total of 1,134 applications were submitted, with half of them approved. The number of applications submitted during these three years exceeded the total of the previous 20 years. Another wave of applications for banking licenses occurred in the 1980s. From 1980 to 1984, a total of 928 national bank licenses were issued. Subsequently, the number of newly issued licenses gradually decreased, and in 1994, only 35 national banks received licenses. The Sakon supervisor not only opened the door to many new license applications but also welcomed and approved many activities that were previously prohibited for banks. During his tenure, a large number of banks converted from state banks to national banks to enter a broader range of business activities.
Policy Considerations Regarding the Impact of Proposed Banks on the Industry
The supervisor makes decisions on whether to issue a license or reject an application based on his or her assessment of the impact of the proposed bank on the industry. The relevant policies are used sequentially to measure the impact of the proposed bank, and these policies collectively form the basis of support for banking regulation. Four policies are frequently cited and form the foundation of banking regulation, playing a significant role in the licensing decision-making process:
① Preventing bank failures;
② Promoting competitive markets;
③ Public convenience and necessity; and
④ Ensuring fair competition between state and national banks.
Theoretically, when assessing the impact of a proposed bank, the supervisor should refer to these policies to determine whether the issuance of a license aligns with the public interest.