Slide 6 of 26
A further reason for an insistence on this broad conceptual approach is to emphasize the degree to which current and likely future jurisdictional developments with respect to financial services represent an accelerating departure from the traditional regulatory regime. Historically, financial institutions, particularly depository institutions, have been been subjected to extremely strict and detailed national and sub-national oversight. The reasons for this include the fact that they were perceived as dangerous on several grounds; that they were perceived by governments as a source of uncomfortably independent power; and that only in a detailed regulatory regime could they be manipulated for purposes of political favoritism. A history of US banking could be written around the central theme of the forces that have tried to hold back, and to expand, the permissible geographic range over which financial institutions in the US could offer their products and services. Historically, jurisdictional questions have not presented difficult issues for depository institutions in the United States. Banking by US depository institutions was very local. In the early 1900ís, the United States had as many as 25,000 banks, nearly all without branches. Most payments were in related to very local commercial activities. In fact, as late as the 1990ís, some states required that a bank could not operate outside of its home county. Conversely, no other bank would be granted a charter to do business in that county. A similar situation has existed in most countries and, in some countries, is not far removed from that situation today.
The essential reasons for this local structure involved the limitations of the conveyance of both persons and information. For most of the population, physical travel for a distance of more than 15 miles in a day was not possible. Moreover, the information necessary to conduct banking services needed to be maintained within a single office. Efficient means were not available to distribute that information to a branch network: the signature cards, deposit and loan balances, policy changes, and all the other data necessary to operate a financial institution. Telegrams were useful to covey confirmations and other brief exchanges, but they could not transmit large amounts of data or graphical data such as signature cards, and only with great difficulty could they convey coded data to maintain confidentiality.