financial times article

["Kazuhiro Kurose" <kurose@xxxxxxxxxxxxxxxxxxxxxx>]

Dear everyone

I found interesting article in FT. I would like to introduce its summary. This is article at 19/ 9.

Title: THE AMERICAS: Many US banking rules obsolete, says Greenspan
By PETER SPIEGEL

Alan Greenspan, chairman of the US Federal Reserve, said yesterday the rapid pace of technological change had rendered
many US banking regulations obsolete, and called on developed countries to update their laws to take into account the
rapidly increasing speed of financial transactions.
In a speech to the American Bankers' Association, Mr Greenspan did not offer any specific recommendations on modernising
banking rules. But he noted that regulators were becoming much more reliant on the private market to discipline itself.
"These developments reinforce the truth of a key lesson from our banking history - that private counterparty supervision
remains the first line of regulatory defence," he said.
As the industry became more self-regulated, Mr Greenspan said, public disclosure would become increasingly important,
especially if large banks hoped to ward off more intrusive regulations.
Mr Greenspan made the warnings despite recent sweeping banking reform legislation, which repealed many Depression-era
regulations preventing commercial banks, insurers and securities firms from entering each other's business.
The reforms also helped modernise banking rules, giving regulators new tools to supervise shaky banks.
But Mr Greenspan said the new legislation was "only a flag on the way to future changes", adding that regulators around
the world would find themselves increasingly forced to become less "detail-oriented" and more focused on "umbrella
supervision".
Mr Greenspan predicted the shift would require regulators to move away from concentrating on looking for irregularities
in specific debt portfolios. Instead, supervisors would be focused on ensuring that internal risk models set up by banks
were working properly and that the risks were being appropriately managed.
"We are in a dynamic system that requires not just us, but also our colleagues in the Group of Ten to adjust," he said.
"It must be done substantially right the first time because, with the financial system changing so rapidly, we do not
have the luxury of reversing course and going in a wholly different direction."
Despite the regulatory perils presented by advances in telecommunications and computing, Mr Greenspan also emphasised
that new technology was helping reduce the cost of capital for banks, making the industry more efficient and cheaper for
consumers.
He noted that the spread of real-time information, for example, had made it easier for banks to judge a borrower's risk
of default.


Mr. Greespan argued that rapid pace of technological change make banking regulations obsolete, however, I can't imagine
concretely. What kind of regulations have been obsolete yet?
And from theoretical perspective, I think that the situation argued in the article is very similar to Minsky's
arguments, in particular, 'Central banking and Money Market Changes' published at QJE in 1957. As you know, Almost
Post-Keynesian regard him as one of pioneers of Post-Keynesian, but some economists such as LP-Rochon never regard him
as Post-Keynesian. Apart from the interpretation whether Minsky is Post-Keynesian or not, I think that the world where
he considered is very realistic.
What do you think about my opinion?

Sincerely


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  Kazuhiro Kurose
  Graduate School of Economics and Business
  Administration, Hokkaido University
  Kita 9 Nishi 7, Kita-Ku, Sapporo, Japan
  060-0809
    TEL: +81-11-716-2111 ex:2786
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