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88 S. Cal. L. Rev. Postscript 1 (2014-2015)

handle is hein.journals/pstscrpt87 and id is 1 raw text is: NARROW BANKING AS A STRUCTURAL REMEDY FOR THE PROBLEM OF SYSTEMIC RISK: A COMMENT ON PROFESSOR SCHWARCZ'S RING-FENCING ARTHUR E. WILMARTH, JR.* In Ring-Fencing,1 Professor Steven Schwarcz provides an insightful overview of the concept of ring-fencing as a potential regulatory solution to problems in banking, finance, public utilities, and insurance.2 As Professor Schwarcz explains, ring-fencing can best be understood as legally deconstructing a firm in order to more optimally reallocate and reduce risk.-3 Ring-fencing has gained particular prominence in recent years as a strategy for limiting the systemic risk of large financial conglomerates (also referred to herein as universal banks). Professor Schwarcz describes several ring-fencing plans that have been adopted or proposed in the United States, United Kingdom, and European Union.4 This Comment argues that narrow banking is a highly promising ring-fencing remedy for the problems created by universal banks. Narrow banking would strictly separate the deposit-taking function of universal banks from their capital markets activities. If properly implemented, narrow banking could significantly reduce the safety net subsidies currently * Professor of Law, George Washington University Law School. I am grateful to Peter Conti- Brown for helpful comments on a preliminary draft of this Comment. This Comment includes developments through June 30, 2014. 1. Steven L. Schwarcz, Ring-Fencing, 87 S. CAL. L. REV. 69 (2013). 2. Id. at 70. 3. Id. at71. 4. Id. at 78-81, 98-105 (summarizing the regulatory approaches of the Vickers Report, the Glass-Steagall Act, and the Volcker Rule).

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