Universal Banking
UNIVERSAL BANKING
What is Universal Banking?
“Banking that includes not only services related to savings and loans but also investments.” This is most common in European countries as it is prohibited by law in the United States. Although, in recent times there has been much market pressure in the US for change.
In universal banking, large banks operate extensive networks of branches, provide many different services, hold several claims on firms (including equity and debt), and participate directly in the corporate governance of firms that rely on the banks for funding or as insurance underwriters.
In our discussion about Universal Banking, we would address the following questions;
• Would universal banking be effective in a newly industrializing economy?
• Does universal banking reduce corporate financing costs for a newly industrializing economy?
• What does it mean to India? Is it a viable option for the ‘Oh so tempestuous’ Indian Economy?
Universal Banking and the Financing of Industrial Development
In a Paper submitted to the World Bank, Calomiris contrasts the cost of financing industrialization in the United States and in Germany during the second industrial revolution. Between 1870 and 1913, large production and distribution activities brought a new challenge to financial markets: the rapid financing of very large, minimally efficient industries. Large production is typical of modern industrial practice, so the lessons from that period apply broadly to contemporary developing countries.
The second industrial revolution involved many new products and technologies, especially involving machinery, electricity, and chemicals. The novelty of these production processes posed severe information problems for external sources of finance. Firms were producing new goods in new ways on an unprecedented scale. Firms needed quick access to heavy financing from sources whose information and control costs were greater because of the difficulty of
What is Universal Banking?
“Banking that includes not only services related to savings and loans but also investments.” This is most common in European countries as it is prohibited by law in the United States. Although, in recent times there has been much market pressure in the US for change.
In universal banking, large banks operate extensive networks of branches, provide many different services, hold several claims on firms (including equity and debt), and participate directly in the corporate governance of firms that rely on the banks for funding or as insurance underwriters.
In our discussion about Universal Banking, we would address the following questions;
• Would universal banking be effective in a newly industrializing economy?
• Does universal banking reduce corporate financing costs for a newly industrializing economy?
• What does it mean to India? Is it a viable option for the ‘Oh so tempestuous’ Indian Economy?
Universal Banking and the Financing of Industrial Development
In a Paper submitted to the World Bank, Calomiris contrasts the cost of financing industrialization in the United States and in Germany during the second industrial revolution. Between 1870 and 1913, large production and distribution activities brought a new challenge to financial markets: the rapid financing of very large, minimally efficient industries. Large production is typical of modern industrial practice, so the lessons from that period apply broadly to contemporary developing countries.
The second industrial revolution involved many new products and technologies, especially involving machinery, electricity, and chemicals. The novelty of these production processes posed severe information problems for external sources of finance. Firms were producing new goods in new ways on an unprecedented scale. Firms needed quick access to heavy financing from sources whose information and control costs were greater because of the difficulty of