If you would compare what the registry of the dot tel domain has done for its domain and community within the first year, and what other registries have done in their first year since the launch of their domain extension, than you might be able to conclude and see, that this is simply outstanding and extraordinary. And no other registry and community has made so much effort before, to develope and market its domain within the first year since launch.
I guess that marketing of a mobile domain, has to be done in a similar way a for example as it was done for the iPhone.
.Tel should look upon dot mobi (.mobi), as its brother, because, as far as I know, it is the only other mobile domain that exists. If you will, it is also early days for dot mobi. Wheras dot mobi offers nothing else, than its domain extension „.mobi“ (but which might be very fine, too), the dot tel domain does not only offer its domain extension „.tel“, but also a practical and useful interface, where you not need to have a website, or any hosting, which means, also, that you save money on webspace and the cost for hosting.
We got to learn from our "brother" (.mobi), about the good and the bad, about the pros and cons.
Despite all the negaive talk and the naysayers: Dot mobi is still there, alive, has a demand for it, and gets sometimes some very nice prices at auctions.
Furthermore: Same as with .tel, there are a lot of people who don't get, what .mobi is about, and why a registry had lauched it, and why it has a lot of companies that are backening it financially.
For many things, .mobi won't be able to be of much use, but in some other situations, it is the perfect solution.
Neither .mobi, nor .tel is probably the „one size fits all solution“. But it might fit, for you, or for him, or her. Just tell them about it, and why it might fit and suit them.
Personally, it think, you either have a love affaire with a name or/and extension, or you don't:
Some names with „.com“, or with „.mobi“ just look darn good. I am not sure, about if a name looks better, if it has „.tel“ instead of a country extension, etc., but it sure will feel darn good.
So that is where .tel will have to be good at: At providing a great feeling and experience.
As we all know: „.com“ stand for „commerce“, and „.mobi“ stands for „mobile device, or mobil phone“. But „.tel“?...: Can you go to your telephone, and use „.tel“? However, „.tel“ means „telecommunications“. But if there would be a person having no clue about the meaning of „.com“ he could think as well, that „.com“ meant „telecommunications“. Why not? Or should it be more like „.comm“ for „communications“? - Commerce, as well as communications start both with "com", and "com" could therefore also stand for (tele)communications, if it had not been promoted for the cause of (e-)commerce.
Anyway: „.tel“ might confuse some people with its extension, because they might not be able to figure out, for what „.tel“ is supposed to stand for.
It might be easier for them, if they get a chance to look at a .tel page.
You could even go so far, and say: Well, if you wan't to put it right, according to common sense, than „.mobi“ should look like the dot tel domain. Because „mobi“ stands for mobile and telecommunication.
Imagine, if „.tel“ had only its extension to offer, like „.mobi“...: People would have to develope a mobile version of their website, and change their „.com“ extension for a „.tel“ extension.
This might have even worked better than with the extension „.mobi“ (if .mobi was .tel, and .tel was .mobi).
- If the extension ".mobi" hadn't been already taken by a other registry, would of possibly Telnic chosen that extension for its interface, that was designed mainly for mobile purpose? Would that of made more sense, having the mobile and electronic business card named "company.mobi", instead of "company.tel"?
However, I think it is just important, that users know, for what „.mobi“ and „.tel“ stand for, and how they can be used in the most efficient way. So that it will then be up to them, to decide, if they could benefit from such a extension/domain, or not.
As we concluded: „.com“ or „.tel“ could quasi stand for anything (communications or telefon, etc.).
The strength of the „.mobi“ name might just be, that people are most likely to easily figure out, that the domain name with such a extension is for mobile devices. Maybe even soon, for smartbooks (smaller mini laptops, that are smaller than netbooks).
Why is „.tel“ not better named ".tele", or „.teleco“, or „.telecom“ (dot tele, or dot teleco, or dot telecom)? - Would there be less confusion? Is „.tel“ confusing?
„.Tel“ probably will mean nothing to the user, until he gets his hands on .tel, and realizes, how awsome this „.tel“ is.
With the registries themselfs, it is also a case fo "first com, first serve" (served by ICANN), because the extension ".com", as well as ".mobi" would of been perfect for the electronic business card that Telnic had launched a year ago. However, as soon as a extension is properly branded and marketed, it will work, no matter, if the extension makes sense, or not, for its cause and usage (see the dot com domain, after a period of twenty five years). Because ".com" could mean this, or that, or also that. Who thinks, every time he uses a ".com" that it means "commerce"? - The only thing they know, is that they can do business with that domain, and that it is not a non-profit website, like you can find under a domain name with the extension ".info", ".museum", etc.
.
So, what is the message?:
We got to get people to know, for what the domain name extension ".tel" stands for, and they might want to take a look at it. Otherwhise they might say: "Why bother and do "try and error", and possible waste some time? After all: Isn't it ".mobi", that is for mobile phones? Is there something else, as well?" - Tell the world...
.
But seriously, folks: The DotMobi registry and Telnic better make some sort of a deal..., becaus the one registry has the name, and the other one has great functions and features, and will have the looks (very soon).
It is not the first time, that two important companies have merged together, to be more successful, in hard economic times, and in a market with a lot of competition, etc. - All those mobile phone users, and the potential ones to come: We don't want to confuse them, but we want to give them something, that they can use, and that is easy to get and to use.
Merry Christmas!
Tuesday, 15 December 2009
Friday, 11 December 2009
Wednesday, 9 December 2009
Saturday, 12 September 2009
foresightbanking.com
Mobile banking will take off over the next 5 years, led by behavioural challenges in the developing world as people who currently have no access to banking or electronic payment services take up mobile banking. mocoNews reports.
quotemarksright.jpgInforma Telecoms & Media predicts that in 2013 almost 300 billion transactions worth more than $860 billion will be conducted using a mobile phone, which would represent a 12-fold increase in gross global transaction values in just five years.
-- Informa predicts that by 2013, over 445 million mobile subscribers will be regularly using their mobile phone to purchase physical goods and services remotely.
-- By 2013 there will be 977 million users of mobile banking services worldwide, compared to around 67 million at the end of 2008 forecasts Informa.
-- Informa predicts that by 2013 almost 424 million consumers will be sending over $157 billion of personal funds via mobile domestically whilst a further 73 million will be sending $48 billion of funds via mobile internationally.
Read full article. Image from Palisade .
emily | 9:50 PM | permalink
This Domain is available.
For Sale.
Only sensible offers.
The right domain name is vital for any online business. Whether it is generic or branded in nature, a carefully chosen domain name will help you to establish an integral online exposure and draw more attention of your online consumers towards your products, projects and services. You will find a selection of quality names that will take your online business to the next higher level. Have a particular name in mind but you don't find it in the list of our Domain Names? Please feel free to contact us and I will do my best to find an ideal name.
Alexander Schiesser
schiesser@2wire.ch
After hearing both the papers prepared for this conference and the discussions that followed the presentations, I want to reflect briefly on several different issues discussed in Perspectives on Safe and Sound Banking. I plan to first focus on the issues that were probably, in hindsight, overemphasized, those that were perhaps underemphasized, and those that were not fully appreciated but subsequently turned out to be important. Finally, I want to raise issues that should be on any agenda for the future.
Issues Overemphasized in the Study
Risk-based deposit insurance. A key issue in the finance literature and in the study was the desirability of gearing deposit insurance to risk and using options pricing theory to price that risk appropriately. While risk-based premiums were adopted in the Federal Deposit Insurance Corporation Improvement Act (FDICIA), implementation has proved to be problematic. Premiums are arguably too low and are collected only from more risky institutions. Beyond this, however, are two issues that limit risk-based pricing as a useful means to control risk taking. The first is the realization that appropriate pricing depends upon not only the ability to measure risk but also to close an institution promptly when it becomes insolvent. Second, effective risk monitoring and control involves a trade-off between the costs of monitoring a bank's risk exposure continually against both the expected costs of that monitoring and expected losses should an institution become insolvent between examinations or inspections.
Revisions to regulatory agency structure and lender of last resort. The report recommended several changes in bank regulatory agency structure, including creating a competing deposit insurance option to be administered by the Office of the Comptroller of the Currency, parceling out lender-of-last-resort administration to the insurance agencies using funds drawn from the Federal Reserve, and taking the Federal Reserve out of the prudential supervision area. It probably is not practical to consider such reforms, given that the United States has still not seen fit to combine depository institution insurance funds, and only the central bank can provide credible lenders-of-last-resort funds. However, two issues are important. First was the suggestion that the insurance funds should have a primary role in banking supervision because they have the strongest incentives to monitor bank risk exposures. In the United States, the Federal Deposit Insurance Corporation (FDIC) is in the first loss position should a failure occur. It also, under FDICIA, is acting as the agent for other banks that stand to lose should FDIC funds be exhausted. Second, this view on supervision stands in stark contrast to how deposit insurance and supervisory responsibilities are apportioned in the European Union, where generally deposit insurers are not involved in supervision.
Issues Underemphasized in the Study
Prompt corrective action. While the study did argue that institutions should be closed via a prompt corrective action (PCA) scheme before net worth fell to zero, the importance of PCA combined with structured early intervention and resolution (SEIR)-a concept that evolved later-as perhaps the best way to protect taxpayer interests was not fully realized. These concepts and their link to banking soundness have proved important not only in the United States, where they have been codified under FDICIA, but also as a framework for dealing with supervision and prudential soundness issues in a cross-border banking world.
Accounting issues. The report argued for market-value accounting, which, when combined with PCA and SEIR, is necessary to protect the taxpayer from the costs of regulatory forbearance. The importance of market-value accounting, or at least the need to calculate the market value of banks' equity, has yet to gain much traction in regulatory circles. Much attention has been given to the problem of implementing market-value accounting. But more focus has been directed to capital adequacy, which turns out to be diverting the attention of regulatory agencies from the fundamental problems of measuring net worth. Putting the valuation issue front and center, especially in a global environment with more and more derivatives and other exotic financial assets coming together, looms as the critically important-but as yet unrecognized-problem for banking supervisors.
Controlling regulatory incentives. One of the key problems in the past has been the tendency of regulatory and supervisory agencies to engage in forbearance toward troubled institutions. FDICIA requires the FDIC to minimize failure costs to taxpayers and requires disclosure and explanations when losses do occur. However, banking regulators-with differing mixes of goals and responsibilities-can still be faced with conflicts of interest and agency problems, which can sometime lead to less-than-optimal decisions in dealing with troubled institutions. Indeed, Eisenbeis and Wall (2002) have shown that many institutions are still closed with losses to the insurance fund, suggesting that PCA is not always having its desired outcome. Kane, for example, has devoted considerable attention to controlling regulatory incentives, which remains a problem both in the United States and abroad (see Hovakimian, Kane, and Laeven 2003; Kane 1988, 1989, 1991, 2000, 2003, 2006).
Consolidated risk management. The report argued that regulatory approaches that attempted to separate risk taking within a bank holding company structure- either to protect bank subsidiaries from risk taking in sister banks or from risks in nonbanking subsidiaries-were fruitless. Subsequent developments show that increasingly banking organizations are consolidating risk management and operations functions so that subsidiaries and affiliates are not operationally independent of each other. This trend suggests that the report's conclusion about how conceptually to approach the supervision of complex institutions rings truer today than ever and should be an important focus of banking supervision and risk control going forward.
Underappreciated Issues
Over the past twenty years the financial system has evolved in ways that have changed its structure and risk profiles, significantly changing the way that institutions take on risk and control their risk exposures. Three such developments were underappreciated by authors at the time in terms of either the speed or significance with which they might affect bank safety and soundness. The first was the removal of McFadden Act restrictions on interstate banking and the speed and manner in which the banking system structure changed. Within a few short years, bank mergers significantly reduced the number of banking organizations, increased the size of the largest institutions, and concentrated their headquarters, principally in New York and Charlotte, North Carolina. The events of 9/11 in particular exposed the potential vulnerability of such concentration and the risks to a smooth functioning of our financial markets should one or more large institution experience financial difficulties.
The second underappreciated development was the spread of computer-related technologies in combination with the explosion of intellectual technologies in the form of financial engineering. This development radically changed both institutions' risk profiles and their ability to evolve and price assets and liabilities that had previously been provided only in bundled form or not at all. The resulting decoupling of the apparent risks-through the use of new derivative instruments-associated with given assets and liabilities traditionally inferred by looking at balance-sheet measures or direct inspections via the examination process no longer necessarily reflects an institution's true riskiness.
The third development was the growth and expansion of truly global institutions, which now suggest that the origins of risk and vulnerabilities are not only more complex but may oftentimes be more associated with developments in other parts of the world rather than in domestic markets. As a result, better communication, coordination, and sharing of information with non-U.S. regulators are now a necessity. Effective PCA and SEIR procedures to close institutions before net worth becomes negative combined with bankruptcy procedures that empower regulators to close institutions and resolve them promptly hold the greatest promise to limit systemic risk problems and to control financial crises.
Concluding Remarks and Some Key Issues for the Future
Having reflected upon the study and the papers prepared for the conference, I note several issues that would be appropriate to consider as potential agenda items should a similar study be undertaken in the future. The following is a brief list of concerns, in no particular order of importance.
Accounting reform. As mentioned earlier, the key to risk monitoring and control is effective valuation of net worth, which requires not only the ability to value assets and liabilities but also to appropriately consider the interactions among subsidiaries and affiliates within complex organizations and to understand the implications for valuation posed by new derivative instruments and contingent liabilities.
Identity theft and privacy issues. As financial markets become more global and dependent upon electronic transactions, the speed with which funds can be withdrawn from individuals' accounts and from entire banking entities is accelerated. Finding ways to both verify and protect individuals' identities is crucial to ensuring confidence in electronic payments media. There may be an important role for regulators in this sphere that has yet gone unexplored.
Shrinking role of intermediaries and the growth of capital markets. Many countries are now producing financial stability reports, and increasingly these reports are focusing on the risks and implications of potential systemic problems emanating from financial markets rather than from financial institutions. This concern is a natural reflection of the growing role that capital markets play in financial intermediation relative to financial institutions. Attention now needs to turn to what role regulators and central banks may need to play in dealing with such risks as well as the need to better understand crossmarket and cross-institution linkages that arise from the trading of instruments, such as derivatives, which now separate out some of the risks that typically had been embedded in financial instruments and loans.
PCA and SEIR as ways to enhance Basel I and Basel II initiatives. Present Basel I and Basel II initiatives have concentrated on the definition and measurement of capital for regulatory purposes and ways to employ them to limit bank risk taking. The benefit of this exercise has been that institutions are now more systematic and concerned about their internal risk measurement schemes and capital allocation methods. Going forward, attention should be given to how to deal with troubled institutions as their capital positions deteriorate and the role that PCA and SEIR might play to limit the negative spillover effects of failure and to better protect the taxpayer from potential liability should major institutions fail and exhaust their deposit insurance funds.
Consolidation risks. The relaxation of interstate banking restrictions and the resulting consolidation of the banking industry has resulted in more concentration in U.S. banking, with most of the nation's largest organizations headquartered in either New York or Charlotte. Should one of these large institutions experience financial difficulty, not only would the prompt resolution of such an institution be extremely difficult, but also the potential drain on the FDIC fund could be enormous because of the large size of these mega-institutions. Additionally, the experience of 9/11 has shown that certain events can actually close down U.S. financial markets and institutions. The concentration of our largest institutions reduces the geographic diversification that our banking system once had. So close attention now needs to be paid to how regulators and the Federal Reserve would respond to a similar event and how we can best ensure that our markets and institutions are robust.
Role of the lender of last resort. As risks to the smooth functioning of the financial system and markets are increasingly likely to be associated with liquidity problems or shocks to particular capital and instrument markets rather than to risks coming from banking organizations, additional consideration should be given to what role, if any, the Federal Reserve should play as lender of last resort in limiting the spread of these risks. In particular, what channels should be employed to provide liquidity? To whom should this liquidity be available? Would basic open market operations be sufficient to cushion markets? What role should central banks generally play in dealing with market liquidity shocks that are transnational in origin?
Cross-border banking. Cross-border banking is growing, and U.S. banking organizations are playing an increasingly important role in the financial systems and markets of other countries. At the same time, most of the world's largest banks are now conducting significant operations in the United States. As a result, these institutions are now faced with myriad different regulatory regimes, regulators are increasingly dependent upon their counterparts in other countries for information, and the failure of such institutions will have spillover effects in not only their domestic economies but perhaps even greater implications for financial systems that are hosting them (see Eisenbeis 2006; Eisenbeis and Kaufman 2005, 2006). Regulators need a better understanding of how to measure and monitor the risks that these institutions pose as well as to seek ways to harmonize their legal, bankruptcy, regulatory, and supervisory regimes.
REFERENCES
Eisenbeis, Robert A. 2006. Home country versus crossborder negative externalities in large banking organization failures and how to avoid them. Federal Reserve Bank of Atlanta Working Paper 2006-18, October.
Eisenbeis, Robert A., and George G. Kaufman. 2005. Bank crisis resolution and foreign-owned banks. Federal Reserve Bank of Atlanta Economic Review 90, no. 4:1-18.
_____. 2006. Cross-border banking: Challenges for deposit insurance and financial stability in the European Union. Paper presented at the European Commission's third annual Directorate General for Economic and Financial Affairs research conference, "Adjustments under Monetary Unions: Financial Markets Issues." Brussels, September 7-8.
Eisenbeis, Robert A., and Larry D. Wall. 2002. Reforming deposit insurance and FDICIA. Federal Reserve Bank of Atlanta Economic Review 87, no. 1:1-16.
Hovakimian, Armen, Edward J. Kane, and Luc Laeven. 2003. How country and safety-net characteristics affect bank risk-shifting. Journal of Financial Services Research 23, no. 3:177-204.
Kane, Edward J. 1988. Changing incentives facing financial-services regulators. Paper prepared for a Federal Reserve Bank of Cleveland conference, "Perspective on Banking Regulation."
_____. 1989. Changing incentives facing financialservices regulators. Journal of Financial Services Research 2, no. 3:265-74.
_____. 1991. Incentive conflict in the international regulatory agreement on risk-based capital. In Pacific- Basin capital markets research, vol. 2, edited by S. Ghon Rhee and Rosita P. Chang. Amsterdam: North- Holland/Elsevier.
_____. 2000. The dialectical role of information and disinformation in regulation-induced banking crises. Pacific-Basin Finance Journal 8, nos. 3-4:285-308.
_____. 2003. What kind of multinational depositinsurance arrangements might best enhance world welfare? Pacific-Basin Finance Journal 11, no. 4:413-28.
_____. 2006. Confronting divergent interests in crosscountry regulatory arrangements. Reserve Bank of New Zealand Bulletin 69, no. 2:5-17.
ROBERT A. EISENBEIS
At the time of the conference, the author was executive vice president and director of research of the Federal Reserve Bank of Atlanta. These remarks were presented as part of a roundtable discussion at the conference "Safe and Sound Banking: Past, Present, and Future," held August 17-18, 2006, and cosponsored by the Federal Reserve Banks of San Francisco and Atlanta and the founding editors of the Journal of Financial Services Research.
Eisenbeis, Robert A "Hindsight and Foresight about Safe and Sound Banking". Economic Review - Federal Reserve Bank of Atlanta. FindArticles.com. 12 Sep, 2009. http://findarticles.com/p/articles/mi_qa5423/is_200701/ai_n21286337/
quotemarksright.jpgInforma Telecoms & Media predicts that in 2013 almost 300 billion transactions worth more than $860 billion will be conducted using a mobile phone, which would represent a 12-fold increase in gross global transaction values in just five years.
-- Informa predicts that by 2013, over 445 million mobile subscribers will be regularly using their mobile phone to purchase physical goods and services remotely.
-- By 2013 there will be 977 million users of mobile banking services worldwide, compared to around 67 million at the end of 2008 forecasts Informa.
-- Informa predicts that by 2013 almost 424 million consumers will be sending over $157 billion of personal funds via mobile domestically whilst a further 73 million will be sending $48 billion of funds via mobile internationally.
Read full article. Image from Palisade .
emily | 9:50 PM | permalink
This Domain is available.
For Sale.
Only sensible offers.
The right domain name is vital for any online business. Whether it is generic or branded in nature, a carefully chosen domain name will help you to establish an integral online exposure and draw more attention of your online consumers towards your products, projects and services. You will find a selection of quality names that will take your online business to the next higher level. Have a particular name in mind but you don't find it in the list of our Domain Names? Please feel free to contact us and I will do my best to find an ideal name.
Alexander Schiesser
schiesser@2wire.ch
After hearing both the papers prepared for this conference and the discussions that followed the presentations, I want to reflect briefly on several different issues discussed in Perspectives on Safe and Sound Banking. I plan to first focus on the issues that were probably, in hindsight, overemphasized, those that were perhaps underemphasized, and those that were not fully appreciated but subsequently turned out to be important. Finally, I want to raise issues that should be on any agenda for the future.
Issues Overemphasized in the Study
Risk-based deposit insurance. A key issue in the finance literature and in the study was the desirability of gearing deposit insurance to risk and using options pricing theory to price that risk appropriately. While risk-based premiums were adopted in the Federal Deposit Insurance Corporation Improvement Act (FDICIA), implementation has proved to be problematic. Premiums are arguably too low and are collected only from more risky institutions. Beyond this, however, are two issues that limit risk-based pricing as a useful means to control risk taking. The first is the realization that appropriate pricing depends upon not only the ability to measure risk but also to close an institution promptly when it becomes insolvent. Second, effective risk monitoring and control involves a trade-off between the costs of monitoring a bank's risk exposure continually against both the expected costs of that monitoring and expected losses should an institution become insolvent between examinations or inspections.
Revisions to regulatory agency structure and lender of last resort. The report recommended several changes in bank regulatory agency structure, including creating a competing deposit insurance option to be administered by the Office of the Comptroller of the Currency, parceling out lender-of-last-resort administration to the insurance agencies using funds drawn from the Federal Reserve, and taking the Federal Reserve out of the prudential supervision area. It probably is not practical to consider such reforms, given that the United States has still not seen fit to combine depository institution insurance funds, and only the central bank can provide credible lenders-of-last-resort funds. However, two issues are important. First was the suggestion that the insurance funds should have a primary role in banking supervision because they have the strongest incentives to monitor bank risk exposures. In the United States, the Federal Deposit Insurance Corporation (FDIC) is in the first loss position should a failure occur. It also, under FDICIA, is acting as the agent for other banks that stand to lose should FDIC funds be exhausted. Second, this view on supervision stands in stark contrast to how deposit insurance and supervisory responsibilities are apportioned in the European Union, where generally deposit insurers are not involved in supervision.
Issues Underemphasized in the Study
Prompt corrective action. While the study did argue that institutions should be closed via a prompt corrective action (PCA) scheme before net worth fell to zero, the importance of PCA combined with structured early intervention and resolution (SEIR)-a concept that evolved later-as perhaps the best way to protect taxpayer interests was not fully realized. These concepts and their link to banking soundness have proved important not only in the United States, where they have been codified under FDICIA, but also as a framework for dealing with supervision and prudential soundness issues in a cross-border banking world.
Accounting issues. The report argued for market-value accounting, which, when combined with PCA and SEIR, is necessary to protect the taxpayer from the costs of regulatory forbearance. The importance of market-value accounting, or at least the need to calculate the market value of banks' equity, has yet to gain much traction in regulatory circles. Much attention has been given to the problem of implementing market-value accounting. But more focus has been directed to capital adequacy, which turns out to be diverting the attention of regulatory agencies from the fundamental problems of measuring net worth. Putting the valuation issue front and center, especially in a global environment with more and more derivatives and other exotic financial assets coming together, looms as the critically important-but as yet unrecognized-problem for banking supervisors.
Controlling regulatory incentives. One of the key problems in the past has been the tendency of regulatory and supervisory agencies to engage in forbearance toward troubled institutions. FDICIA requires the FDIC to minimize failure costs to taxpayers and requires disclosure and explanations when losses do occur. However, banking regulators-with differing mixes of goals and responsibilities-can still be faced with conflicts of interest and agency problems, which can sometime lead to less-than-optimal decisions in dealing with troubled institutions. Indeed, Eisenbeis and Wall (2002) have shown that many institutions are still closed with losses to the insurance fund, suggesting that PCA is not always having its desired outcome. Kane, for example, has devoted considerable attention to controlling regulatory incentives, which remains a problem both in the United States and abroad (see Hovakimian, Kane, and Laeven 2003; Kane 1988, 1989, 1991, 2000, 2003, 2006).
Consolidated risk management. The report argued that regulatory approaches that attempted to separate risk taking within a bank holding company structure- either to protect bank subsidiaries from risk taking in sister banks or from risks in nonbanking subsidiaries-were fruitless. Subsequent developments show that increasingly banking organizations are consolidating risk management and operations functions so that subsidiaries and affiliates are not operationally independent of each other. This trend suggests that the report's conclusion about how conceptually to approach the supervision of complex institutions rings truer today than ever and should be an important focus of banking supervision and risk control going forward.
Underappreciated Issues
Over the past twenty years the financial system has evolved in ways that have changed its structure and risk profiles, significantly changing the way that institutions take on risk and control their risk exposures. Three such developments were underappreciated by authors at the time in terms of either the speed or significance with which they might affect bank safety and soundness. The first was the removal of McFadden Act restrictions on interstate banking and the speed and manner in which the banking system structure changed. Within a few short years, bank mergers significantly reduced the number of banking organizations, increased the size of the largest institutions, and concentrated their headquarters, principally in New York and Charlotte, North Carolina. The events of 9/11 in particular exposed the potential vulnerability of such concentration and the risks to a smooth functioning of our financial markets should one or more large institution experience financial difficulties.
The second underappreciated development was the spread of computer-related technologies in combination with the explosion of intellectual technologies in the form of financial engineering. This development radically changed both institutions' risk profiles and their ability to evolve and price assets and liabilities that had previously been provided only in bundled form or not at all. The resulting decoupling of the apparent risks-through the use of new derivative instruments-associated with given assets and liabilities traditionally inferred by looking at balance-sheet measures or direct inspections via the examination process no longer necessarily reflects an institution's true riskiness.
The third development was the growth and expansion of truly global institutions, which now suggest that the origins of risk and vulnerabilities are not only more complex but may oftentimes be more associated with developments in other parts of the world rather than in domestic markets. As a result, better communication, coordination, and sharing of information with non-U.S. regulators are now a necessity. Effective PCA and SEIR procedures to close institutions before net worth becomes negative combined with bankruptcy procedures that empower regulators to close institutions and resolve them promptly hold the greatest promise to limit systemic risk problems and to control financial crises.
Concluding Remarks and Some Key Issues for the Future
Having reflected upon the study and the papers prepared for the conference, I note several issues that would be appropriate to consider as potential agenda items should a similar study be undertaken in the future. The following is a brief list of concerns, in no particular order of importance.
Accounting reform. As mentioned earlier, the key to risk monitoring and control is effective valuation of net worth, which requires not only the ability to value assets and liabilities but also to appropriately consider the interactions among subsidiaries and affiliates within complex organizations and to understand the implications for valuation posed by new derivative instruments and contingent liabilities.
Identity theft and privacy issues. As financial markets become more global and dependent upon electronic transactions, the speed with which funds can be withdrawn from individuals' accounts and from entire banking entities is accelerated. Finding ways to both verify and protect individuals' identities is crucial to ensuring confidence in electronic payments media. There may be an important role for regulators in this sphere that has yet gone unexplored.
Shrinking role of intermediaries and the growth of capital markets. Many countries are now producing financial stability reports, and increasingly these reports are focusing on the risks and implications of potential systemic problems emanating from financial markets rather than from financial institutions. This concern is a natural reflection of the growing role that capital markets play in financial intermediation relative to financial institutions. Attention now needs to turn to what role regulators and central banks may need to play in dealing with such risks as well as the need to better understand crossmarket and cross-institution linkages that arise from the trading of instruments, such as derivatives, which now separate out some of the risks that typically had been embedded in financial instruments and loans.
PCA and SEIR as ways to enhance Basel I and Basel II initiatives. Present Basel I and Basel II initiatives have concentrated on the definition and measurement of capital for regulatory purposes and ways to employ them to limit bank risk taking. The benefit of this exercise has been that institutions are now more systematic and concerned about their internal risk measurement schemes and capital allocation methods. Going forward, attention should be given to how to deal with troubled institutions as their capital positions deteriorate and the role that PCA and SEIR might play to limit the negative spillover effects of failure and to better protect the taxpayer from potential liability should major institutions fail and exhaust their deposit insurance funds.
Consolidation risks. The relaxation of interstate banking restrictions and the resulting consolidation of the banking industry has resulted in more concentration in U.S. banking, with most of the nation's largest organizations headquartered in either New York or Charlotte. Should one of these large institutions experience financial difficulty, not only would the prompt resolution of such an institution be extremely difficult, but also the potential drain on the FDIC fund could be enormous because of the large size of these mega-institutions. Additionally, the experience of 9/11 has shown that certain events can actually close down U.S. financial markets and institutions. The concentration of our largest institutions reduces the geographic diversification that our banking system once had. So close attention now needs to be paid to how regulators and the Federal Reserve would respond to a similar event and how we can best ensure that our markets and institutions are robust.
Role of the lender of last resort. As risks to the smooth functioning of the financial system and markets are increasingly likely to be associated with liquidity problems or shocks to particular capital and instrument markets rather than to risks coming from banking organizations, additional consideration should be given to what role, if any, the Federal Reserve should play as lender of last resort in limiting the spread of these risks. In particular, what channels should be employed to provide liquidity? To whom should this liquidity be available? Would basic open market operations be sufficient to cushion markets? What role should central banks generally play in dealing with market liquidity shocks that are transnational in origin?
Cross-border banking. Cross-border banking is growing, and U.S. banking organizations are playing an increasingly important role in the financial systems and markets of other countries. At the same time, most of the world's largest banks are now conducting significant operations in the United States. As a result, these institutions are now faced with myriad different regulatory regimes, regulators are increasingly dependent upon their counterparts in other countries for information, and the failure of such institutions will have spillover effects in not only their domestic economies but perhaps even greater implications for financial systems that are hosting them (see Eisenbeis 2006; Eisenbeis and Kaufman 2005, 2006). Regulators need a better understanding of how to measure and monitor the risks that these institutions pose as well as to seek ways to harmonize their legal, bankruptcy, regulatory, and supervisory regimes.
REFERENCES
Eisenbeis, Robert A. 2006. Home country versus crossborder negative externalities in large banking organization failures and how to avoid them. Federal Reserve Bank of Atlanta Working Paper 2006-18, October.
Eisenbeis, Robert A., and George G. Kaufman. 2005. Bank crisis resolution and foreign-owned banks. Federal Reserve Bank of Atlanta Economic Review 90, no. 4:1-18.
_____. 2006. Cross-border banking: Challenges for deposit insurance and financial stability in the European Union. Paper presented at the European Commission's third annual Directorate General for Economic and Financial Affairs research conference, "Adjustments under Monetary Unions: Financial Markets Issues." Brussels, September 7-8.
Eisenbeis, Robert A., and Larry D. Wall. 2002. Reforming deposit insurance and FDICIA. Federal Reserve Bank of Atlanta Economic Review 87, no. 1:1-16.
Hovakimian, Armen, Edward J. Kane, and Luc Laeven. 2003. How country and safety-net characteristics affect bank risk-shifting. Journal of Financial Services Research 23, no. 3:177-204.
Kane, Edward J. 1988. Changing incentives facing financial-services regulators. Paper prepared for a Federal Reserve Bank of Cleveland conference, "Perspective on Banking Regulation."
_____. 1989. Changing incentives facing financialservices regulators. Journal of Financial Services Research 2, no. 3:265-74.
_____. 1991. Incentive conflict in the international regulatory agreement on risk-based capital. In Pacific- Basin capital markets research, vol. 2, edited by S. Ghon Rhee and Rosita P. Chang. Amsterdam: North- Holland/Elsevier.
_____. 2000. The dialectical role of information and disinformation in regulation-induced banking crises. Pacific-Basin Finance Journal 8, nos. 3-4:285-308.
_____. 2003. What kind of multinational depositinsurance arrangements might best enhance world welfare? Pacific-Basin Finance Journal 11, no. 4:413-28.
_____. 2006. Confronting divergent interests in crosscountry regulatory arrangements. Reserve Bank of New Zealand Bulletin 69, no. 2:5-17.
ROBERT A. EISENBEIS
At the time of the conference, the author was executive vice president and director of research of the Federal Reserve Bank of Atlanta. These remarks were presented as part of a roundtable discussion at the conference "Safe and Sound Banking: Past, Present, and Future," held August 17-18, 2006, and cosponsored by the Federal Reserve Banks of San Francisco and Atlanta and the founding editors of the Journal of Financial Services Research.
Eisenbeis, Robert A "Hindsight and Foresight about Safe and Sound Banking". Economic Review - Federal Reserve Bank of Atlanta. FindArticles.com. 12 Sep, 2009. http://findarticles.com/p/articles/mi_qa5423/is_200701/ai_n21286337/
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