Implications of Financial Innovation and Reform for the Savings and Loan Industry

• Published in: Journal of the American Real Estate and Urban Economics Association 1980-04, Vol.8 (1), p.148-155
• Main Author: Marcis, Richard G.
• Format: Article
• Language: English
• Subjects: Changes; Competition; Depository Institutions Deregulation & Monetary Control Act 1980-US; Deregulation; Diversification; Financial institutions; Innovations; Predictions; Reforms; Savings & loan associations; Securities markets
• ISSN: 1080-8620; 0270-0484; 1540-6229
• DOI: 10.1111/1540-6229.00209

Over the past decade several developments have changed the structure of the financial markets in which savings and loan associations (S & Ls) operate. Deregulation and increased competition have had a profound impact. The most significant development has been the increased competition for deposit funds due to regulatory initiatives and market-inspired innovations. This competition has come from commercial banks, savings banks, and credit unions. Another important development is the passage of the Depository Institutions Deregulation and Monetary Control Act of 1980. These developments have had the following implications for S & Ls: 1. greater dependence on non-deposit sources of funds, 2. increased diversification, 3. greater mortgage rate volatility, and 4. increased emphasis on operating efficiency and profitability. There are 3 potential problem areas facing S & Ls: 1. capital adequacy, 2. inequitable tax treatment, and 3. the period of transition in which deposit rate controls are being phased out. The financial markets are likely to change dramatically during the 1980s, and competition will become more intense.