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date: 18 March 2019

Abstract and Keywords

Universal banks are institutions that combine the lending and payment services of commercial banks with a wider range of financial services. While universal banks dominate the financial sector in some economies, they are relatively uncommon in others. Indeed, they were outlawed in the US for the last two-thirds of the twentieth century. Understanding this international variation has been a preoccupation of economists since Schumpeter (1939) and Gerschenkron (1962). This article outlines Gerschenkron's ideas, and relates them to more recent discussions of the subject. It discusses the potential for conflicts of interest within universal banks, and assesses other policy debates surrounding universal banks, in particular the repeal of the Glass–Steagall Act. The article concludes with a discussion of the reasons for the recent expansion in the number and importance of universal banks, and it assesses some of the potential consequences of this expansion.

Keywords: universal banks, Gerschenkron, conflicts of interest, banking regulation, Glass–Steagall Act

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