{"id":27416,"date":"2015-03-30T04:47:44","date_gmt":"2015-03-30T04:47:44","guid":{"rendered":"http:\/\/vskills.in\/certification\/blog\/?p=27416"},"modified":"2024-04-03T13:22:53","modified_gmt":"2024-04-03T07:52:53","slug":"financial-market-liberalisation","status":"publish","type":"post","link":"https:\/\/www.vskills.in\/certification\/blog\/financial-market-liberalisation\/","title":{"rendered":"Financial market liberalisation"},"content":{"rendered":"<p style=\"text-align: center\"><a ref=\"magnificPopup\" href=\"http:\/\/vskills.in\/certification\/blog\/wp-content\/uploads\/2015\/03\/Financial-market-liberalisation.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-27581\" alt=\"Financial market liberalisation\" src=\"http:\/\/vskills.in\/certification\/blog\/wp-content\/uploads\/2015\/03\/Financial-market-liberalisation.jpg\" width=\"270\" height=\"187\" \/><\/a><\/p>\n<p>Governments liberalisation of financial markets in the 1970s and 1980s led<br \/>\nto greater volatility of market\u00a0exchange rates\u00a0and interest rates \u00a0. That created<br \/>\nboth the impetus to, and the means for, further innovation in banks\u2019 financial management. Interest rate volatility and exchange rate volatility created<br \/>\nsignificant new risks and increased the importance of banks managing their<br \/>\nassets and liabilities. From 1973, instruments for managing such risks \u2013<br \/>\nfinancial derivatives in the form of financial options like\u00a0forwards contract, futures contract and<br \/>\nswaps \u2013 became widely usable. That is because new techniques (based on<br \/>\nthe Black-Scholes model) made it possible to price them and because organised markets were constructed. Financial derivatives enabled banks<br \/>\nto manage asset and liability risks better. They also enabled banks to develop new lines of business by creating derivatives for customers as over-the counter instruments on which the banks earned fees or profit margins.<br \/>\nThose activities were beyond the scope of a Basic Retail Bank (or even a nonbasic retail bank) and should be seen as the business of investment banks.<br \/>\nTherefore, in order to understand those developments, it is useful to see<br \/>\nhow the constraints imposed by the Glass-Steagall Act in the United States<br \/>\nand by other restrictions in other countries, separating commercial banks<br \/>\nfrom investment banks\u00a0were broken down\u00a0and\u00a0then entirely abolished\u00a0.<br \/>\nFederal Reserve interpretations and court judgements banks<br \/>\nin America gained the right for themselves or subsidiaries to:\u2022 advise on and sell securities (1980)<br \/>\n\u2022 establish affiliates with a range of securities activities (1987)<br \/>\n\u2022 carry out banking across the nation (1994)<br \/>\n\u2022 sell insurance nationwide (1997)<br \/>\n\u2022 underwrite a wide range of bond and equity issues (1996).<br \/>\nFinally, most remaining constraints imposed by the Glass-Steagall Act were<br \/>\nabolished in 1999 by the passage of the Financial Services Modernization<br \/>\nAct.<br \/>\nThese changes, together with international agreements on financial services<br \/>\nin 1997, enabled banks to merge and grow, engaging in a wide range of both<br \/>\nretail and wholesale banking services (or commercial and investment<br \/>\nbanking services). Several grew to include insurance services and operate as<br \/>\nuniversal banks, although universal banking had long been established in the<br \/>\nbanks of continental Europe and the mix of banking and insurance was<br \/>\nmainly a European model \u2013 \u2018bancassurance\u2019. The outstanding example was<br \/>\nCitigroup, a global bank formed in 1998 by the merger of Citibank and<br \/>\nTravelers (principally a large insurance company).<\/p>\n<p><a href=\"http:\/\/www.vskills.in\/certification\/accounting-banking-and-finance\">Click here for government certification in Accounting, Banking &amp; Finance<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Governments liberalisation of financial markets in the 1970s and 1980s led to greater volatility of market\u00a0exchange rates\u00a0and interest rates \u00a0. That created both the impetus to, and the means for, further innovation in banks\u2019 financial management. Interest rate volatility and exchange rate volatility created significant new risks and increased the importance of banks managing their&#8230;<\/p>\n","protected":false},"author":625,"featured_media":27581,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_joinchat":[],"footnotes":""},"categories":[1519],"tags":[2132,2858,2559,2195,2857,2600,2168],"class_list":["post-27416","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting-banking-and-finance","tag-cost","tag-earnings","tag-govt","tag-liability","tag-liberalisation","tag-market","tag-reforms"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Financial market liberalisation - Vskills Blog<\/title>\n<meta name=\"description\" content=\"What are the various effects of the Financial market liberalisation?\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.vskills.in\/certification\/blog\/financial-market-liberalisation\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Financial market liberalisation - 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