Identify and critically appraise the main trends that have taken place in corporate and wholesale banking over the past twenty years or so. In your answer make a critical appraisal of the effect these trends have had on the nature and structure of the industry
The recent two decades witnessed the great change in the financial world. In the past, the banks might are limited with the ability of exchange foreign currency, but nowadays, it is available to exchange foreign currency at any time in most of the banks. In the past, a majority of Chinese might have no idea about HSBS, however, there are 108 branches of HSBS in China now. In the past, the banks did not sell stocks in the market, to the contrary, nowadays many commercial banks had began this practice following the J.P. Morgan. It can be seen that the banking system has altered greatly. In accordance with Kent Matthews and John Thompson’s view, three trends have the dominant influence on the alternation of the corporate and wholesale banks, and they are deregulation, financial innovation and globalization, respectively.
At the end of last century, the deregulation of financial markets and banks had been a main force to push forward the development of corporate and wholesale banking. Kent Matthews and John Thompson, the authors of The Economics of Banking, have pointed out that the deregulation happens in two aspects: “one is the removal of impositions of government bodies and another one is the removal of self-imposed restrictions.” In terms of the first one, for instance, United States approved Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 to empower the state banks to break the state barriers and to conduct cross-state cooperation and alliances. Meanwhile, the banks removed the self-imposed restrictions, for example, by setting the same rates for a particular project. After a series of research, Matthews and Thompson also recommended that the process of deregulation was carried out in three phases. Firstly, both the quantitative controls on bank assets and the restrictions of interest rates were removed, which can be proved by the application of Exchange Control Act, Hire Purchase Control Act and so on. For the second phase, the difference between banks and other financial intermediaries got vaguer during the recent decades, for instance, The Gramm-Leach-Bliley Act (GBLA), which is also known as the Financial Services Modernization Act of 1999, broke up the separation between bank insurance and bank investment. Banks got more freedom in their financial business through this Act. When it comes to the third phase, it can be seen that the financial markets faces a more demanding environment, in the other words, an increasing number of new entrants, ranging from the retail stores to the automobile companies, set foot in the financial market and began to provide financial services, for example, Tesco Finance.
The information technology had a great influence on the development of the world during the recent twenty years, and the financial market was not an exception. Financial innovation is the second trend, and Christian Noyer defined it as “an emergence of new financial instruments and services, and of new forms of organization in more sophisticated and complete financial markets”. Besides, it can also be considered as a result of the combined influence of the revolution of information technology, financial instability and regulation (Matthews and Thompson). In detail, the effects of technology mainly are reflected in the diversification of bank products, the reduction of cost, and the decrease of time consumed. For instance, the wide application of internet has forced the spread of information, and the relevant people who have access to the internet can be informed the latest financial information almost at the same time. Meanwhile, the establishment of new branches seems to get less important since the money transactions can be conducted...
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