Liberalisation of Financial Markets Essay Example | Topics and Well Written Essays - 2000 words

Liberalisation of Financial Markets - Essay Example during the 1970s and 1980s and was characterised by the abolition of credit and interest rate ceilings, the abolition of controls on international movements of capital, as well as the abolition of regulations affecting a wide range of financial activities in a significant number of OECD countries. (Blundell-Wignall and Browne, 1991). One can observe from table 1 that most of the reforms took between the 1970s and 1990s and mainly involved the elimination of interest rate ceilings and credit limits. Banks were also given more freedom to engage in mortgages. Financial liberalisation has also been characterised by securitisation1. Financial liberalisation has been successful in that it has encouraged the formation of stock markets where they did not exist and has encouraged their deepening where they predated the reforms. (Grabel, 1995). For example, there has been an impressive expansion of stock markets in less developed countries (LDCs) following the adoption of financial liberalisation in these countries. ... -Implementation of the Second Banking Directive (89/646/EEC) into national law in 1993; -Separation of long-term and short-term credit institutions abolished in 1994. United Kingdom -Credit controls "the corset", eliminated in 1980; -Bank of England's minimum lending rate abolished in 1981; -Banks allowed to compete with building societies for having finance after 1981; -Building societies allowed to expand their lending business after 1986; -Withdrawal of guidelines on mortgage lending in 1986; -Securitisation introduced in 1987; -Implementation of the Second Banking Directive (89/646/EEC) into national law in 1993; Canada -Elimination of ceilings on interest rates on bank loans in 1967; -Restrictions on banks' involvement in mortgage financing abolished in 1967; -Banks allowed to have mortgage loan subsidiaries in 1980; -Securitisation in 1987. Source: Boone et al. (2001). One can observe from table 1 that most of the reforms took between the 1970s and 1990s and mainly involved the elimination of interest rate ceilings and credit limits. Banks were also given more freedom to engage in mortgages. Financial liberalisation has also been characterised by securitisation1. Financial liberalisation has been successful in that it has encouraged the formation of stock markets where they did not exist and has encouraged their deepening where they predated the reforms. (Grabel, 1995). For example, there has been an impressive expansion of stock markets in less developed countries (LDCs) following the adoption of financial liberalisation in these countries. For example, Grabel (1995) notes that LDC stock markets listed some 5,531 domestic companies and had a market capitalisation of US$86,125million and an annual trading volume of US$23,672million in 1980. By 1992, 36