Munich Personal RePEc Archive

Regulation and the Public Interest in Banking

Jehle, Geoffrey (1985): Regulation and the Public Interest in Banking. Published in: Journal of Banking and Finance , Vol. 10, (1986): pp. 549-573.

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The rules that should govern competition and conduct in banking are currently the topics of spirited debate. This paper proposes a rigorous welfare-theoretic methodology which can provide a unifying focus for a wide range of regulatory and market structure issues in banking. The methodology is then applied in an empirical study of recent FDIC bank merger decisions. Evidence is found that potential welfare losses to borrowers and welfare gains to bank owners do influence the decisions taken, and that borrowers and bank owners receive roughly equal treatment by the regulator. The potential welfare losses to depositors, however, appear to be generally ignored.

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