How has the Commercial Banking

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How has the commercial banking industry transformed over the last fifty years? What are the forces behind such a transformation? Explain in light of environment, risks, profits, and regulations. Highlight the changes in the assets and liabilities of commercial banking.
The commercial banking industry began to change drastically around the 1960's. Because the economy was growing rapidly so did the demand for loans. The commercial banking industry main challenge prior to 1960 was finding excess loans and after 1960 their main concern was finding enough deposits to satisfy this increased demand for loans. This increased demand for loans spurred competition among banks in that they tried to outbid each other's deposit rates. In an effort to prevent this "destructive competition" the Federal Reserve passed Regulation Q. Regulation Q was the Federal Reserve's way of imposing a ceiling on deposit rates which intended to promote stability among banks. However, one of the major downfalls of Regulation Q was its exclusion of market interest rates. When market interest rates went up money market instruments such as T-Bills and commercial paper became more attractive to investors, specifically Corporations. Because these high-quality borrowers decided to invest in commercial paper banks were forced to lend to riskier individuals.
Moreover, the financial landscape of the commercial banking industry changed largely in part due to the invention of Money Market Mutual Fund in 1971. This marked the beginning of the end for Regulation Q. Money Market Mutual Funds allowed small investors to pool funds to buy a diversified portfolio of money market instruments, such as T-Bills, commercial paper, and negotiable certificate's of deposits (CD's). Before the availability of Money Market Mutual Funds it was virtually impossible for small investors to invest in these instruments because they were only sold in large den…