TY  - JOUR
AU  - Mishkin,Fredric S.
AU  - Strahan,Philip E.
TI  - What Will Technology Do to Financial Structure?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6892
PY  - 1999
Y2  - January 1999
UR  - http://www.nber.org/papers/w6892
L1  - http://www.nber.org/papers/w6892.pdf
N1  - Author contact info:
Frederic S. Mishkin
Columbia University
Graduate School of Business
Uris Hall 817
3022 Broadway
New York, NY 10027
Tel: 212-854-3488
Fax: 212/662-8474
E-Mail: fsm3@columbia.edu

Philip Strahan
Carroll School of Management
324B Fulton Hall
Boston College
Chestnut Hill, MA  02467
Tel: 617/552-6430
E-Mail: philip.strahan@bc.edu
AB  - This paper looks at how advances in information and telecommunications technologies have been changing the structure of the financial system by  lowering transaction costs and reducing asymmetric information.  Households and smaller businesses can now raise funds in securities markets as financial institutions have become better at unbundling risks while financial products can be distributed more efficiently through electronic networks. These changes have reduced the role of traditional financial intermediaries overall efficiency by lowering the costs of financial contracting. Despite these benefits technological progress presents policymakers with some important challenges.  First markets for financial products become larger and more contestable, defining geographic and product markets narrowly becomes more problematic.   Second, financial consolidation and the trend towards new activities of financial intermediaries require the exploration of new methods to preserve the safety and soundness of the financial system.  A combined system of vigilant supervision and constructive ambiguity to deal with failures of larger institutions should be capable of mitigating the potential for increased risk-taking and help preserve the health of the financial system.
ER  -