Technology is radically changing the face of the banking landscape. What may come as a surprise to some, however, is that technology is spawning new avenues of discussion in the debate over financial services deregulation-particularly among Federal Reserve officials.

Advances in computer and communications technologies now allow financial services firms to analyze customer and product risks to a degree never before considered possible. To make the most of these new capabilities, many organizations, particularly the largest, are centralizing risk management, a trend, experts say, that is good for institutional efficiency and profitability.

Federal Reserve Board Chairman Alan Greenspan concurs. But the Fed chief says the trend also raises "fundamental policy issues" about how to regulate and supervise these organizations.

Specifically, Greenspan told bankers and regulators attending a May conference at the Chicago Federal Reserve that the trend raises doubts over the feasibility of "functional regulation," where units of a holding company are supervised by different regulators based upon services provided-banking, securities and insurance. "Regulation must fit the architecture of what is being regulated," Greenspan said. At least for the largest banking organizations, he explained, "we must continue to have some type of umbrella supervision." FB

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