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Study of the Effects of Size and Complexity of Financial

Study of the Effects of Size and Complexity of Financial

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Published by: Carrieonic on Jan 02, 2012
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STUDY OF THE EFFECTS OF SIZE AND COMPLEXITY OF FINANCIALINSTITUTIONS ON CAPITAL MARKET EFFICIENCY AND ECONOMICGROWTHPURSUANT TO SECTION 123 OF THE DODD-FRANK WALL STREETREFORM AND CONSUMER PROTECTION ACT OF 2010BY THE CHAIRPERSON OF THE FINANCIAL STABILITY OVERSIGHTCOUNCIL January 2011
 
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Table of Contents
 
I.
 
O
VERVIEW
.................................................................................................................................. 4
 
Introduction ..................................................................................................................................5
 
A Brief Historical Background ................................................................................................ 6
 
Overview of Costs and Benefits of Financial Regulation ....................................................... 7
 
The Nature of this Study .......................................................................................................... 8
 
II.
 
R
EVIEW OF
P
OSSIBLE
L
IMITATIONS
R
EQUIRED BY
S
ECTION
123 ........................................... 9
 
Section A: Costs and Benefits of Explicit or Implicit Limits on the Maximum Size of Banks,Bank Holding Companies, and Other Large Financial Institutions .............................................9
 
Review of the Literature ........................................................................................................ 10
 
Summary ................................................................................................................................ 12
 
Section B: Costs and Benefits of Limits on the Organizational Complexity and Diversificationof Large Financial Institutions ...................................................................................................14
 
Review of the Literature ........................................................................................................ 15
 
Summary ................................................................................................................................ 17
 
Section C: Costs and Benefits of Requirements for Operational Separation Between BusinessUnits of Large Financial Institutions in Order to Expedite Resolution in Case of Failure ........19
 
Review of the Literature ........................................................................................................ 19
 
Summary ................................................................................................................................ 22
 
Section D: Costs and Benefits of Limits on Risk Transfer between Business Units of LargeFinancial Institutions ..................................................................................................................23
 
Review of the Literature ........................................................................................................ 24
 
Summary ................................................................................................................................ 26
 
Section E: Costs and Benefits of Requirements to Carry Contingent Capital or SimilarMechanisms ................................................................................................................................28
 
Review of the Literature ........................................................................................................ 30
 
Summary ................................................................................................................................ 33
 
Section F: Costs and Benefits of Limits on Commingling of Commercial and FinancialActivities by Large Financial Institutions ..................................................................................35
 
Review of the Literature ........................................................................................................ 36
 
Summary ................................................................................................................................ 38
 
 
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Section G: Costs and Benefits of Segregation Requirements between Traditional FinancialActivities and Trading or Other High-Risk Operations in Large Financial Institutions ............39
 
Review of the Literature ........................................................................................................ 39
 
Summary ................................................................................................................................ 47
 
R
EFERENCES
................................................................................................................................. 48
 

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