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Narrow Banking – Banking System Without Private Issuance of Credit Money as a Solution for More Resistant Banks and More Stable Financial System / Usko Bankarstvo - Bankarski Sistem Bez Privatne Emisije Kreditnog Novca Kao Rešenje za Otpornije Banke i Stabilniji Finansijski Sistem

100%

Radojičić J., Radovanović P.

Economic Themes

2015

vol. 53

issue 3

376-397

The global financial crisis has revived interest in the introduction of the “narrow banking”, which has become a topical issue in both political and academic circles. There are attitudes that banks have maximized yields by excessive credit expansion, while the losses associated with the excessive risks undertaken in pre-crisis period fell at the expense of taxpayers. Based on the idea that modern financial systems have structural problems whose solution requires fundamental reform, a new wave of regulatory proposals is launched for solving the problems. They are generally aimed to eliminate the banks’ ability to issue credit money that enjoys both implicit and explicit government guarantees. The concept of narrow banking, as one of the variants of full-reserve banking, provides ex-ante a level of bank deposits’ protection which is the same as the level of central bank’s money protection. Motives for the application of this concept are the following: to make banks more resistant to bank runs; to avoid creating a speculative “bubbles”; and to make the financial system more stable. The paper gives an overview of historical and new proposals of narrow banking. In addition, the concept of narrow banking is analyzed from the point of view of its basic characteristics and objectives, followed by a discussion on the problems and possible success of its implementation.

Narrow Banking from the Perspective of Risk

58%

Pera J.

Acta Universitatis Lodziensis. Folia Oeconomica

2019

vol. 4

issue 343

53-72

Celem artykułu jest identyfikacja ryzyka wynikającego z próby stabilizacji systemu bankowego z zastosowaniem narrow banking, co w praktyce przekłada się na nałożenie restrykcji na różne rodzaje aktywów utrzymywanych przez banki i obsługujących depozyty bieżące. W tym celu zostały omówione następujące kwestie: istota i koncepcje „wąskiej bankowości” oraz wynikające z niej ryzyko. Postawiona hipoteza badawcza jest następująca: narrow banking to skuteczna koncepcja wykorzystywana do zabezpieczenia stabilności systemu finansowego. Zasadnicze ryzyko implementacji koncepcji „wąskiej bankowości” wypływa z: kosztów ubezpieczenia depozytów, częściowej utraty efektywności banków, niedopasowania struktur aktywów i pasywów banku (powstania luki GAP) oraz wielkości i struktury kredytów dla sektora niefinansowego. W wyniku przeprowadzonej analizy zidentyfikowano po sześć ryzyk pośrednich dla przyjętego poziomu ryzyka: niskiego, średniego i wysokiego.

The aim of this article is to identify risks arising from the attempt to stabilise the banking system with the use of narrow banking, which in practice means imposing restrictions on various types of assets held by banks and on handling current deposits. To this end, the following will be discussed: the nature and concepts of narrow banking and the risks of narrow banking. The research hypothesis is as follows: narrow banking is an effective concept to use to secure the stability of the financial system. The principal risk connected with the implementation of the concept of narrow banking results from: the cost of deposit insurance, partial loss of banks’ efficiency, mismatching of structures of assets and liabilities of the bank (resulting in GAP), as well as the size and structure of loans for the non‑financial sector. As a result of the conducted analysis, 6 indirect risks were identified, each for the assumed risk level: low, medium and high.

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1 Acta Universitatis Lodziensis. Folia Oeconomica

1 Economic Themes

1 Pera J.

1 Radojičić J.

1 Radovanović P.

1 2019

1 2015

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Narrow Banking – Banking System Without Private Issuance of Credit Money as a Solution for More Resistant Banks and More Stable Financial System / Usko Bankarstvo - Bankarski Sistem Bez Privatne Emisije Kreditnog Novca Kao Rešenje za Otpornije Banke i Stabilniji Finansijski Sistem

Narrow Banking from the Perspective of Risk