Allen N. Berger (editor) - The Oxford Handbook of Banking

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Federal Reserve Bank of New York

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First Edition published in 2010
Second Edition published in 2015

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ISBN 9780199688500
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For Mindy (Allen N. Berger)
For Delyth, Alun, Gareth, Gethin, Catrin,
Lois, and Rhiannon (Philip Molyneux)
For Alison, Kathryn, Elizabeth, and Jean (John O. S. Wilson)

Since, the publication of the first edition of the Oxford Handbook of Banking in 2010, banking systems around the world have continued to be affected by the recent financial crisis which began in 2007. There have been wide-ranging regulatory reforms aimed at containing their risk-taking capabilities. Regulatory reform has been most marked in the US with the passing of the landmark DoddFrank Act of 2010, which aims to eliminate too-big-to-fail and the implicit taxpayer bailouts of major banks. The Act also seeks to reduce the risk-taking capacity of banks by limiting proprietary trading and other volatile business areas, embodied in the Volcker Rule. Similar major reforms are ongoing throughout the European Union following the Liikanen Report of 2012 and the Vickers Report of 2011, both of which aim to segregate or ring-fence banks risky securities activities from less volatile retail banking operations. Coupled with this is the desire to bolster regulatory oversight as well as to force institutions to hold more capital and liquidity. The latter two are encapsulated by the Basel III reforms that national legislators are expected to put fully into place by 2019.

In addition to the turmoil associated with the recent financial crisis, Europe has also experienced a sovereign debt crisis, where weak banking systems and excessive government indebtedness have led to sovereign bailouts of Greece, Ireland, Spain, and Portugal (the so-called euro periphery countries). This has had implications for the credibility of the European single currency and policy conducted by the European Central Bank. It has also led to the recognition that bank and sovereign risks are inextricably linked.

The second edition is substantially updated and changed from the first edition, with at least 40% new material, reflecting the unprecedented changes that have occurred in global banking systems. This new edition provides the reader with a timely and comprehensive overview and analysis of many of these developments. The authors of the following 40 chapters comprise a collection of leading academics and policymakers in the field. These authors emanate from universities in North America, Europe, South America, and Asia; the US Federal Reserve System; the Office of the Comptroller of Currency; the Central Bank of Ireland, the European Central Bank; the World Bank; and the International Monetary Fund. The book strikes a balance among abstract theory, empirical research, practitioner analysis, and policy-related material. Chapters in the handbook have different emphases on these four ingredients. We hope that the contributions contained here set the stage for future research and policy debate for many years to come.

Allen N. Berger

Philip Molyneux

and John O. S. Wilson

October, 2014

First, and most important, we wish to thank the contributors to the handbook. We are delighted to have brought together such an outstanding set of research experts from academic and policy arenas across Europe, North America, South America, and Asia. These experts have shown a high level of commitment and perseverance to the project from beginning to end. Without their expertise, dedication, and efficiency in producing scholarly banking chapters, this handbook would never have been possible.

The production of this handbook has also relied heavily on the exceptional enthusiasm and commitment of Oxford University Press, most notably Adam Swallow, publisher for Economics and Finance, who was crucial in helping us kick-start the project. Oxford University Press delegates and a number of anonymous referees also played an important role in advising on the shape of the handbook. We would also like to especially thank and acknowledge the advice of Aimee Wright, who was always on hand to help and worked closely with us throughout the entire process. The team in New York also played a valuable role, and so wed like to thank Michael De La Cruz and Lauren Konopko. The editors would particularly like to thank Elizabeth Stone, copy-editor, for doing an excellent job on the submitted manuscript. Carol Carnegie and Saipriya Kannan also played a crucial role toward the end of the project, and our proof reader, Denise Bannerman, provided invaluable service.

We would also like to acknowledge the support of our home institutions: the Moore School of Business at University of South Carolina, the Business School at Bangor University, and the Management School at University of St Andrews.

A number of individuals provided comments to us on the content and style on parts of the handbook, including Barbara Casu, Mark Flannery, Claudia Girardone, John Goddard, Dick Herring, Ed Kane, Jos Liares-Zegarra, Donal McKillop, Joe Peek, and Larry White. A big thank you goes to them all.

Finally, we would like to thank our families and friends for their encouragement and patience over the last two years while we completed this handbook. Their support is much appreciated.

ALLEN N. BERGER, PHILIP MOLYNEUX, AND JOHN O. S. WILSON

FRANKLIN ALLEN, ELENA CARLETTI, AND XIAN GU

ARNOUD W. A. BOOT AND ANJAN V. THAKOR

RICHARD J. HERRING AND JACOPO CARMASSI

ALAN D. MORRISON

JENS HAGENDORFF

LINDA ALLEN AND ANTHONY SAUNDERS

CHRISTA H. S. BOUWMAN

KEVIN J. STIROH

JOSEPH P. HUGHES AND LORETTA J. MESTER

W. SCOTT FRAME AND LAWRENCE J. WHITE

ALLEN N. BERGER

THOMAS A. DURKIN AND GREGORY ELLIEHAUSEN