THE RISE AND DECLINE OF UNIVERSAL BANKING

Original scientific paper
Autor: doc dr Sanja Vučković, Prof. dr Vladimir Prvulović
JEL: G01, G21, G24, N20

Summary: The contemporary crisis has reopened the old dilemmas about the separation of commercial and investment banking. Indisputable facts about what caused the crisis speak in favor of the thesis that the frenzied exotic operations with securities were the main trigger of the financial breakdown. The biggest roles were played by investment banks, as the main players in this market segment, hence the potential solution for preventing future financial problems imposed itself in the form of separating investment and commercial banking operations. The major argument is not to allow the taxpayers’ money to once again heel the problems of private banks, problems caused by bad judgments and decisions on the part of ambitious and imprudent managers. In its first part, the paper focuses on the development of universal banking and the clarification of specific political and social circumstances relevant for the adoption of the first law regulating universal banks. The paper moves on to indicate the advantages and disadvantages of this concept, whereas its final section sums up the frameworks of the new stricter regulations and recommendations in this field of the financial market.

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