How does product segmentation reduce the risks of fis? how does it increase the risks of fis?
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What general prohibition regarding the activities of commercial banking and investment banking did the Glass-Steagall Act impose? What investment banking activities have been permitted for U.S. commercial banks?
Sections 16 and 21 of the Glass-Steagall Act specifically prohibited banks from engaging in the underwriting, issuing, and distributing of stocks, bonds, and other securities, while specifically prohibiting investment banks from taking deposits and making commercial loans.
See Table 21-2 for specific Glass-Steagall language. Commercial banks have been the following securities activities: a) underwriting U.S Treasury and U.S. agency securities, b) underwriting general obligation municipal securities, c) the private placement of bonds and equity securities, d) underwriting and dealing in securities offshore, e) mergers and acquisitions, f) individual trust accounts, g) dividend investment service, h) brokerage services, i) securities swaps, and j) research advice to investors separate from brokerage.
5. What restrictions were placed on section 20 subsidiaries of U.S. commercial banks that make investment banking activities other than those permitted by the Glass-Steagall Act less attractive? How does this differ from banking activities in other countries?
Although banks are allowed to engage in otherwise ineligible investment banking activities by creating Section 20 subsidiaries, the revenue from these ineligible activities cannot exceed more than 50 percent of the total revenue of the security firm affiliations. Consequently, only the large banks with businesses in activities permitted under the Glass-Steagall Act, such as trading U.S. Treasuries or general obligation municipal bonds are able to undertake the ineligible activities. In addition, a stringent firewall between Section 20 subsidiaries and the commercial banks makes it difficult for banks to exploit economies of scale and divers
Sections 16 and 21 of the Glass-Steagall Act specifically prohibited banks from engaging in the underwriting, issuing, and distributing of stocks, bonds, and other securities, while specifically prohibiting investment banks from taking deposits and making commercial loans.
See Table 21-2 for specific Glass-Steagall language. Commercial banks have been the following securities activities: a) underwriting U.S Treasury and U.S. agency securities, b) underwriting general obligation municipal securities, c) the private placement of bonds and equity securities, d) underwriting and dealing in securities offshore, e) mergers and acquisitions, f) individual trust accounts, g) dividend investment service, h) brokerage services, i) securities swaps, and j) research advice to investors separate from brokerage.
5. What restrictions were placed on section 20 subsidiaries of U.S. commercial banks that make investment banking activities other than those permitted by the Glass-Steagall Act less attractive? How does this differ from banking activities in other countries?
Although banks are allowed to engage in otherwise ineligible investment banking activities by creating Section 20 subsidiaries, the revenue from these ineligible activities cannot exceed more than 50 percent of the total revenue of the security firm affiliations. Consequently, only the large banks with businesses in activities permitted under the Glass-Steagall Act, such as trading U.S. Treasuries or general obligation municipal bonds are able to undertake the ineligible activities. In addition, a stringent firewall between Section 20 subsidiaries and the commercial banks makes it difficult for banks to exploit economies of scale and divers
Anonymous:
may i know, where is table 21 - 2 ??
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hy
here is your answer
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Product segmentation increases the profitability of FIs by providing incentives for the FI to develop technology and other innovations to improve production efficiency. Product segmentation increases the risk of the FI because the benefits of diversification are reduced.
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i hope you understand
here is your answer
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Product segmentation increases the profitability of FIs by providing incentives for the FI to develop technology and other innovations to improve production efficiency. Product segmentation increases the risk of the FI because the benefits of diversification are reduced.
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i hope you understand
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