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Universal Banking

In: Business and Management

Submitted By steffy
Words 1330
Pages 6
Universal banking is the norm in lower- and middle-income countries. Ever- expanding safety nets also seem to be the norm in the 20th century in these same countries. Is there a connection between the two? Should the structure of the financial system influence the depth or breadth of the financial safety net adopted by governments? Why or why not?

The role and the future of safety nets as an inherent feature of the majority of financial systems today have been debated widely following the recent financial and economic meltdown. In order to develop adequate reforms for the global financial system, it is important to understand the role of safety nets in both developed and developing economies and its interconnection with the financial institutions. This paper will investigate two major issues. First, it will analyze interconnection of safety nets and universal banks in the lower- and middle-income countries (LMIC). Second, it will look into interdependence of the safety nets’ features and the types of the financial systems. It will argue that safety nets’ breadth and depth should be influenced by the structure of the financial system.

Universal banks and safety nets in lower- and middle-income countries

The 20th century witnessed universal banks and safety nets spreading across the LMICs. The explanation of this phenomenon is complex as universal banks and safety nets developed independently, but definitely influenced and reinforced each other in the LMIC markets.

We will start with a closer look at the universal banks in these countries and the reasons for their widespread emergence across the LMICs. First, these markets have usually been characterized by a lower level of competition, which led to oligopoly-based structures in many industries, as the companies with a greater access to capital and other resources tended to consolidate their respective...

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