Publication Date


Document Type


First Advisor

Taylor, Ryland

Degree Name

M.A. (Master of Arts)

Legacy Department

Department of Economics


Bank reserves; Banks and banking


During most of the twentieth century, non-bank financial intermediaries have grown at a more rapid rate than commercial banks. This disparity in growth rates has led into numerous discussions of the following questions: (1) has the effectiveness of monetary policy been weakened by the growth of non-bank financial intermediaries because they have escaped the direct regulation which has been applied to commercial banks, and (2) are commercial banks unfairly constrained in their competition with non-bank financial intermediaries because they are required to keep a legal reserve requirement through which their credit is directly regulated. This paper discusses these questions in detail and examines proposals for change in the regulation of financial intermediaries. The following three proposals are evaluated: (1) the extension of reserve regulation to non-bank financial intermediaries savings deposit operations, (2) the separation of commercial bank savings deposit operations from their demand deposit operations coupled with the elimination of reserve requirements on their savings deposits, and (3) the elimination of interest rate ceilings on bank and non-bank savings deposits. The conclusion drawn from the discussion and evaluation is that uniform reserve requirements for bank and non-bank savings deposits would not be a feasible form of control because of the significantly different effects a uniform change in reserve requirements would have on the operations of banks and non-banks. The proposal to separate the demand and savings deposit operations at commercial banks, as well as the proposal to eliminate interest rate ceilings on savings deposits was concluded to be favorable changes in the regulation of financial intermediaries that would increase the effectiveness and equity of monetary policy as well as the competition between financial intermediaries.


Includes bibliographical references.


v, 65 pages




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