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Should Banks Be Narrowed?
Author:
Mr. Biaggio Bossonenull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2001: Issue 159
Language:
English
Publication Date:
01 Oct 2001
DOI:
https://doi.org/10.5089/9781451857672.001
ISBN:
9781451857672
ISSN:
1018-5941
Pages:
34
Keywords:
WP; bank; deposit; bank narrowness; narrow banking; financial intermediation; nonbanks; narrow-banking regulation; bank market concentration indicator; bank assets; exemption clause; Credit; Bank deposits; Commercial banks; Liquidity; Bank credit
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Over the past seventy years, the proposal to narrow the scope of banks has occurred more and more frequently in financial debates and research. Narrow banking would prevent deposit-issuing banks from lending to the private sector and restrict nonbank intermediaries from funding investments with demand deposits. Proponents of narrow banking defend it as a step toward greater financial stability and efficiency. This study reviews the literature on the subject, contrasts the concept of narrow banking with contemporary banking theories, and evaluates the potential consequences of narrow banking on finance and the real economy. The study also runs an empirical exercise to estimate the costs of bank narrowness and draws policy conclusions.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2001: Issue 159