Universal Banking Essay

Introduction
The most debated critical issue among developed economies is about banking reforms after the global financial crisis of 2008. Vickers (2012) argues that the combination of retail and investment banking increases the failure risks associated with the banking system which in turn leads to different financial crisis. The debate is over the implementation of suggested reforms in terms of splitting the universal banking model which includes both investment and retail banking sectors under one roof. The main suggestions are about employing ring-fencing techniques in retail banking to separate it from investment banking.
Different proposals in the different countries are taken into consideration for reforming the banking structures

It was maintained that universal banks not only provide tailored services to the customers but also lower customers’ costs by employing economies of scale that traditional commercial banks cannot utilize (Aguirre, Lee, and Pantos, 2008). Further, universal banking system is more financially stable due to their diversification model.
In addition, the measures of customers benefits due to inter-connectivity of the financial institution are highlighted which in turn may be affected as a result of separating entities by treasury committee. However, on the other side, Treasury committee exemplifying the Lehman Brothers’ case accepted that inter-connectivity of the financial entities meant a lot. It was accepted that the viability of separating the entities in terms of mitigating the risks is associated with the inter-connectivity of the

On one hand, many favored the viability and stability of reforms while, on the other hand, some authors argued that the reforms would decrease the diversity of operations and will increase the failure risks associated. For instance, Chow and Surti (2011) shed light on the plausible viability of ring-fencing technique in terms of coping with contagion risks.
In the same regard, Montanaro, and Tonveronachi, (2011) stated that one size fits for all approach may not be able to produce an effective results and varying country specific implications can worsen the challenges, as a result. However, with the discussed arguments it is accepted that relatively low investment share universal models are more stable in the crisis time which is supported by many empirical evidences. Some of the major empirical studies that favor a high/low-investment structure are discussed in