Abstract
The
main aim of this article is to explicitly present what the parallel banking
system is and its activities. The first part of the paper focuses on how this
banking system could support real economy and contribute to the regional (and the wider) growth by operating supplementary to the systemic banking
system. A special reference is done on the regulation frameworks that are
applied on those banks in European Union
and in United States. At
this point, it is underlined the importance of the appropriate implementation
of the proportionality principle by regulators so as to avoid the excessive burden
of small regional banks with unnecessary regulation costs. Challenges that
local banks may face during their operation and factors that affect the health of regional and cooperative
banks are pointed out, as well. They are also presented significant sources of
finance from which community banks may raise capital to fund their activities. Moreover, possible
strategies that local banks may follow in order to improve their efficiency and
strengthen their role in the banking system are proposed. Finally, the relation
between regional and cooperative banks with public development banks is set
under consideration and their
differentiations and their common
goals are highlighted.
JEL
classification numbers: G20, G21, G23, G24, G28, G29, P51
Keywords: parallel
banking system, regional banks, community banks, cooperative banks, development
banks, regional growth, proportionality principle, one-size-fits-all rule,
dual-regulatory system, allfinanz.