SEATTLE - Technological forces have spurred competition among banks and nonbanks and demand a new model of regulation, according to Robert P. Forrestal, president of the Federal Reserve Bank of Atlanta.
Speaking at the annual convention of the Georgia Bankers Association, Mr. Forrestal said technological developments in banking render regulatory approaches based on institution or function obsolete.
"Banking reform can no longer be only banking reform - it must be financial services and regulatory reform," the Atlanta Fed chief said. "In a high-tech world, only a new model of regulatory reform can hope to keep up with the changes in products in the markets."
He said three forces are causing a radical reshaping of financial services: securitization, competition from nonbanks, and the explosive growth of the derivatives market.
"At the same time that securitization is clouding the distinction between depository and nondepository financial institutions, derivatives are wiping out the distinctions between-different types of financial market," Mr. Forrestal said.