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The Eurodollar Revolution in Financial Technology: Deregulation, Innovation and Structural Change in Western Banking

In: Financial Markets and Organizational Technologies

Author

Listed:
  • Stefano Battilossi

    (Universidad Carlos III Madrid)

Abstract

Modern financial theories based on the economics of information suggest that banks arise as a response to existing frictions in the process of acquiring information and making transactions. Bank intermediaries ameliorate such frictions through brokerage (which enhances the matching of borrowers and lenders by overcoming information asymmetries) and portfolio transformation (banks acting as delegated monitors and providing liquidity insurance). The way banks perform these functions — their ‘financial technology’ — changed dramatically in the 1970s on a global scale. We define financial technology as a body of knowledge that specifies the whole range of activities creating economic value in financial intermediation, encompassing product, process and organizational technologies. Financial innovations occur in each of these areas and improve the efficiency with which intermediaries perform their basic functions by expanding opportunities for risk sharing, lowering transaction costs and reducing asymmetric information and agency costs (Merton 1995: 463).

Suggested Citation

  • Stefano Battilossi, 2010. "The Eurodollar Revolution in Financial Technology: Deregulation, Innovation and Structural Change in Western Banking," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Alexandros-Andreas Kyrtsis (ed.), Financial Markets and Organizational Technologies, chapter 2, pages 29-63, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-0-230-28317-6_2
    DOI: 10.1057/9780230283176_2
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    Cited by:

    1. Leon Wansleben, 2021. "Divisions of regulatory labor, institutional closure, and structural secrecy in new regulatory states: The case of neglected liquidity risks in market‐based banking," Regulation & Governance, John Wiley & Sons, vol. 15(3), pages 909-932, July.

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