Federal Reserve Bank of San Francisco

Economic Research

Safe and Sound Banking: Past, Present, and Future

August 17 - August 18, 2006

Jointly sponsored by the Federal Reserve Banks of San Francisco and Atlanta and the founding editors of the Journal of Financial Services Research

Federal Reserve Bank of San Francisco

In 1986, a task force of five banking academics organized and sponsored by the American Bankers Association convened to examine the banking industry and the efficacy of its regulatory system. The group was charged with reviewing “the problems of ensuring the safety and soundness of the banking system and looking at a number of policy options to improve the efficiency, performance, and safety of the system by changing the structure of the deposit insurance system and the bank regulatory and supervisory process.”

The report, published by the MIT Press as the book Perspectives on Safe and Sound Banking, focused almost entirely on depository institutions. At the end of the report, the task force presented a menu of principal options and recommendations. Topics covered included

  • Deposit insurance and lender of last resort—Many changes were suggested in structure, coverage, the handling of failing institutions, etc.
  • Market discipline—Increased reliance on the market was suggested to discipline institutions, managers, and stockholders for undue risk taking and to urge the adoption of subordinated debt requirements, use of current value measures of capital, and increased disclosure.
  • Examination and supervisory reforms—Suggestions included regulatory agency reform and the creation of competing insurance agencies.
  • Insurance agencies—Suggestions were made to monitor fund flows and rates and limit deposit insurance coverage.
  • Expanded powers—Changes were suggested in the criteria for approving new powers.
  • Additional concerns included international cross-border regulatory and supervisory issues, pricing of deposit insurance, treatment of foreign branches in the United States, and the importance of self-regulation.

The purpose of this conference is to evaluate how these recommendations have fared during the past twenty years: How many have been adopted in one form or another, how many have been rejected, and how many are still under consideration? The conference will also update the menu of recommendations to deal with the challenges confronting the banking system over the next twenty years.

Agenda

Agenda Download (PDF – 15KB)

Thursday, August 17  
9:00 a.m. Continental breakfast
9:45

Welcome and Opening Remarks
George Kaufman, Loyola University Chicago

10:00

What were the key themes and recommendations in Perspectives on Safe and Sound Banking?

Session Chair: Edward Kane, Boston College

“Safe & Sound Banking, 20 Years Later: What was proposed and what has been adopted” (PDF – 116KB)
Fred Furlong and Simon Kwan, Federal Reserve Bank of San Francisco

Discussants:
James Wilcox, University of California, Berkeley
Eric Rosengren, Federal Reserve Bank of Boston

Noon Lunch, Market Street Dining Room, Fourth Floor
2:30 p.m.

How has the banking system and the process of financial intermediation changed?

Session Chair: George Benston, Emory University

“The emerging dominance of transactions banking and its implications for the banking system”
Robert DeYoung, Federal Deposit Insurance Corporation

Discussants:
Loretta Mester, Federal Reserve Bank of Philadelphia
Myron Kwast, Board of Governors of the Federal Reserve System

5:30

Reception and Dinner, Market Street Dining Room, Fourth Floor

Introduction: Robert Eisenbeis, Federal Reserve Bank of Atlanta

Keynote Speaker:
Randall Kroszner, Board of Governors of the Federal Reserve System

   
Friday, August 18
8:00 a.m. Continental breakfast
8:30

What reforms are needed to improve the safety and soundness of the banking system?

Session Chair: Paul Horvitz, University of Houston

“Supervising Bank Safety and Soundness: Some Open Issues” (PDF – 126KB)
Mark Flannery, University of Florida

Discussants:
Harvey Rosenblum, Federal Reserve Bank of Dallas
Dwight Jaffee, University of California, Berkeley

10:30 Break
10:45

Panel discussion: Regulatory reform issues—key concerns and policy implications

Session Chair: Simon Kwan, Federal Reserve Bank of San Francisco

Panelists:
George Benston, Emory University
Robert Eisenbeis, Federal Reserve Bank of Atlanta
Paul Horvitz, University of Houston
Edward Kane, Boston College
George Kaufman, Loyola University Chicago

12:30 p.m. Lunch and adjournment