laws and regulation of electronic finance

Law and Regulation of ElectronicFinance and Internet Banking

Course Introduction and Overview

Contents

Course Objectives 3

The Course Author 3

What this Course is About 3

An Overview of the Course 4

Learning Outcomes 6

Study Materials 6

Teaching and Learning Strategy 6

Law and Regulation of Electronic Finance and Internet Banking

2 University of London


Centre for Financial and Management Studies 3

Course ObjectivesWelcome to the course Law and Regulation of Electronic Finance and InternetBanking. The course aims to link two apparently distinct topics: informationtechnology and online networks and financial services and markets, and tointroduce and examine the legal issues connected with them.

The Course AuthorApostolos Gkoutzinis is an associate in the Capital Markets Group of theLondon office of Shearman and Sterling, a major international law firm,where he advises investment banks and corporations on all aspects ofinternational securities and capital markets law.

Prior to joining the firm, he was Lecturer in Financial Law at the Universityof London, where he taught a range of courses on international finance andcapital markets law. He has also published extensively in internationalbanking and financial law journals and has spoken in conferences andseminars in Europe and the U.S. Apostolos is a graduate of Harvard LawSchool (LLM ’05), the University of London (PhD ’04, LLM ’04) and theAristotle University of Thessaloniki (BA 1997). His book on Internet BankingLaw was published by Cambridge University Press in November 2006.

What this Course is AboutOn close inspection, the legal problems arising from the provision of finan-cial services, and the creation of financial markets over computer networksmerit independent study in their own right. In the basic form, financialtransactions are about creating, transferring and settling claims for paymentbetween market participants.

These monetary claims are intangible in nature and do not rely on paper tocirculate. They are merely contractual obligations, which can be easilystored, processed, transmitted and distributed in the form of data. Just thinkthe economic cycle of the most basic financial asset: a bank loan. A bank loanrepresents the bank’s monetary claim against the borrower for repayment ofa sum borrowed and the applicable interest. From the initial point of contactof the borrower, to the processing of the application, to the granting of theloan, to the repayment of the loan and the final extinguishment of theborrower’s obligation, the entire asset is created, delivered, and satisfiedthrough entries in computer-based and electronically administered data-bases and subsequently transferred or settled by appropriate book entries, inresponse to messages transmitted via means of telecommunication.

Information technology, computer networks and the Internet enable theswift transmission of this information from one party to another and elimi-nate the constraints of distance and geography on the creation,administration and trading of financial claims and assets. You can replacethe example of a bank loan with any conceivable type of financial asset,



including securities such as stocks and bonds. The mechanics and legalframework may change, but the basic conceptual principles and legal issueswill not.

This course aims to introduce and discuss these legal issues. Unit 1 providesan introduction to the activities, markets and services that fall within theconcept of electronic finance and Internet banking. The basic legal conceptsand issues under English law will be picked up in Unit 2. This unit willexamine the commercial operations and activities of online financial servicesfirms and apply the traditional principles of English law with the aim toidentify the main legal issues that require our attention. The most excitingfeature of online networks – their ability to facilite access to information thattranscends national borders on a global basis – will be the subject of Unit 3.

Information technology and computer networks are probably the maindrivers of financial globalisation. Thus, this is a topic that requires separatetreatment. The law of electronic finance and Internet banking consists of twomain sets of legal principles and rules: the first one relates to the regulationand supervision of online banking and financial activities by regulatoryauthorities; the second relates to the laws governing the private contractualrelationships of market participants. Unit 4 will examine the regulatoryaspects, while Unit 5 will focus on the law relating to the contractual rela-tionships in online financial contracts and any non-regulatory lawsapplicable thereto.

Securities activities such as securities trading over the Internet have theirown legal background, quite distinct from the regulation of electronicbanking activities. Unit 6 will therefore discuss the main legal issuespertaining to online securities trading and the impact of the Internet incapital markets. The European Union has sought to create a genuinepan-European financial market for a long time. Unit 7 will examine thelegislative initiatives and EU law relating to financial activities, with anemphasis on legislative initiatives relating to online financial services.Finally, Unit 8 will discuss the conflict of laws issues generated by cross-border online contracts between market participants operating underdifferent systems of law.

An Overview of the CourseThe course consists of eight ‘Units’, each with its own core text, set readings,questions and exercises. You will also do assignments, and have the oppor-tunity to discuss the course with your fellow students through the OnlineStudy Centre.

The Structure of the Course

Unit 1 Introduction to Electronic Finance and Internet Banking1.1 Introduction1.2 The Internet and the Securities Markets1.3 The Use of the Internet in the Banking Industry1.4 International Market Developments - Electronic Finance in Europe and Beyond1.5 Electronic Finance Across Borders - A Dynamic Form of International Financial Integration



1.6 Essential Institutional and Legal Conditions1.7 Concluding RemarksReferences and Websites

Unit 2 Basic Legal Concepts and Foundations of Electronic Banking andFinancial Activities

2.1 Introduction2.2 The Law of Bank Accounts, Deposits and Electronic Transfers of Funds2.3 The Law of Consumer Credit, Loans and Overdrafts2.4 The Law of Online Securities Trading2.5 Contractual Relationships via the Internet2.6 Concluding RemarksReferences and Websites

Unit 3 Electronic Finance and the Globalisation of Financial Markets3.1 The Second Era of Financial Globalisation3.2 Cross-Border Capital Flows and Financial Services3.3 The Contribution of Electronic Finance to Financial Globalisation3.4 International Regulation of Electronic Finance3.5 ConclusionsReferences and Websites

Unit 4 Prudential Regulation and Supervision of Electronic Finance and Banking4.1 Introduction4.2 Prudential Financial Regulation4.3 Internet Banking4.4 The Basel Committee and Electronic Financial Activities4.5 Prudential Requirements in Key European Jurisdictions4.6 Concluding RemarksReferences and Websites

Unit 5 Law of Electronic Banking in the United Kingdom5.1 The Bank-Customer Relationship5.2 The Bank as Depository of the Online Account5.3 Electronic Transfers of Funds via the Internet5.4 A Basic Overview of the English Law of Online Credit5.5 The Law of Online Financial Services in the UK5.6 Concluding RemarksReferences and Websites

Unit 6 Regulation of Securities Activities over the Internet6.1 Introduction6.2 Online Securities Offerings6.3 The Use of Electronic Media in Capital Markets6.4 Online Securities Transactions in the European Union6.5 Concluding RemarksReferences and Websites

Unit 7 EU Law - The Financial Services Action Plan7.1 The European Union Law of Financial Services7.2 The First Generation of EU Banking and Financial Law - 1985-19987.3 The Financial Services Action Plan - 1998-20057.4 The European Approach to Electronic Commerce7.5 Concluding RemarksReferences and Websites



Unit 8 Cross-Border Electronic Contracts8.1 Conflicts of Laws in the Online Environment8.2 Choice of Law in Cross-Border Electronic Banking Contracts8.3 Applicable Law in the Absence of Choice8.4 Applicable Law in Consumer Contracts for the Provision of Electronic Banking Services8.5 Choice of Law and Mandatory Rules of the Forum of Litigation8.6 Choice of Forum of Litigation8.7 Concluding RemarksReferences and Websites

Learning OutcomesWhen you have completed your study of this course, you will be able to

• define and distinguish the concepts of ‘electronic finance’, ‘Internetbanking’ and ‘electronic banking’

• identify and critically discuss the legal problems relating to thecompletion of cross-border electronic funds transfers and securitiestransactions

• critically discuss the impact of economic and financial globalisation onthe development and current state of traditional jurisdictionalprinciples of international law

• define and distinguish the concepts ‘prudential banking regulation’,‘financial and non-financial risks’, ‘operational risk’, ‘internal controls’and ‘regulation and supervision of online financial activities’

• critically discuss the impact of regulatory measures of consumer andinvestor protection on the development and current state of electroniccommerce in financial services in the United Kingdom

• analyse the key issues and challenges relating to the regulation ofsecurities activities via the Internet

• identify and critically discuss the main components of the FinancialServices Action Plan, and the philosophy of the policies of theEuropean Commission towards the establishment of a functioningmarket in electronic financial services

• explain the criteria used to determine the applicable law to cross-border banking contracts for the provision of online services.

Study MaterialsIn addition to the eight units of the course guide, this course has a range ofrecent and classic articles on the subject, which are incorporated in theCourse Reader.

You will also study a textbook:

Apostolos Gkoutzinis (2006) Internet Banking and the Law in Europe.

Teaching and Learning StrategyAs indicated earlier, this course provides the legal background to help youparticipate successfully in the world of electronic banking.



To facilitate your learning, there are Review Questions and Exercises in theunits. You will get feedback and advice on your progress with the course inthe comments on your assignments, and to help you prepare for the finalexamination, there is a Specimen Examination Paper.

Law and Regulation of ElectronicFinance and Internet Banking

Unit 1 Introduction to ElectronicFinance and Internet Banking

ContentsUnit Content 2

Learning Outcomes 2

1.1 Introduction 3

1.2 The Internet and the Securities Markets 5

1.3 The Use of the Internet in the Banking Industry 7

1.4 International Market Developments – Electronic Financein Europe and Beyond 9

1.5 Electronic Finance Across Borders – A Dynamic Formof International Financial Integration 11

1.6 Essential Institutional and Legal Conditions 17

1.7 Concluding Remarks 18

References and Websites 20



Unit ContentThe main purposes of Unit 1 are to introduce the applications, products andservices collectively known as electronic commerce in financial services,electronic finance and Internet banking – or, simply, e-finance and e-banking. In doing so, we will examine the growth of this industry in variousparts of the world and explain the reasons behind the increasing customeracceptance of such services and products. The unit will also outline and dis-cuss the process of international financial integration, its main elements, itscurrent status and how the Internet may facilitate cross-border financial andcapital flows and the provision of financial services across national borders.

Learning OutcomesWhen you have completed your study of this unit and its readings, you willbe able to

• define and distinguish the concepts of electronic finance, Internetbanking, electronic banking

• identify and critically discuss the benefits and risks of electronicfinancial and banking applications and services

• outline the main reasons for the growth of this industry and criticallydiscuss whether the advent of the Internet and its many applicationsby financial institutions and markets may strengthen or improve theglobal financial system

• outline and critically discuss the various methods of deliveringfinancial services via the Internet.

Readings for Unit 1

Course ReaderFranklin Allen, James McAndrew and Philip Strahan (2002) ‘E-Finance: AnIntroduction’

Stijn Claessens, Thomas Glaessner and Daniela Klingebiel (2002) ‘RecentTrends in Financial Services’

Karen Furst, William Lang and Daniel Nolle (2002) ‘Internet Banking in theNational Banking System’.

TextbookApostolos Gkoutzinis (2006) Internet Banking and the Law in Europe,‘Introduction’ and Chapter 1 ‘Internet Banking in Europe: Basic Conceptsand Recent Trends’.

Unit 1 Introduction to Electronic Finance and Internet Banking


1.1 Introduction The advent of the Internet and advances in information technology andtelecommunications unquestionably are having significant effects onfinancial markets and institutions. No one seems to doubt that, in thelong run, electronic finance will result in more efficient financialintermediation. Declining costs of information will reduce some of theuncertainty that gives rise to financial risks. New financial instrumentsand risk-management techniques will reduce the required rates of returnfor bearing the risks that remain by allowing them to be unbundled andshifted more effectively than has been possible. However, manyobservers are concerned about the short-run challenges that those rapidadvances in technology pose for financial institutions and markets andfor policymakers. Some institutions inevitably will suffer erosion of theirfranchise values as competitors, new and old, prove more adept attapping the potential gains from the new technology. Electronic financerepresents an acceleration of the process that noted economist JosephSchumpeter many years ago termed ‘creative destruction’ – thecontinuous shift in which emerging technologies push out the old.

(Greenspan, 2000)

Today, several years after Federal Reserve Chairman Greenspan’s remarks,the profound effect of the Internet and electronic commerce on financialmarkets and the financial services industry is not seriously challenged. It isnow hard to find a financial institution that does not offer financial servicesvia the Internet or offer some other kind of electronic interaction with itscustomers, regulators or competitors.

To such an extent have information technology and open computer net-works transformed the world of finance that discussing the legal andregulatory problems generated by electronic finance or Internet bankingmay sound a little bit like discussing the legal problems relating to theautomobile: in modern life, the law of personal injury is more often than notapplied in connection with injuries sustained in car accidents; but despitethe influence of the car accident in the development of the law of torts andpersonal injury in the second half of the twentieth century, we are far fromhaving a distinct branch of automobile law, with its own underlying princi-ples and rules.

Similarly, despite the transformation of the financial services industry underthe influence of computer networks, the World Wide Web and powerfulfinancial software, electronic commerce in financial services has not createda distinct field of law pertaining to the use of the Internet in the financialservices industry. It has simply raised certain new types of legal risks andproblems, which have been dealt with by innovative market practices, thegeneral law of banking and finance and a limited number of Internet-specificlegal reforms that were necessary to replace outdated legal forms and con-cepts.

The advent of electronic finance has also helped us better understand thewisdom of our banking and financial laws and regulations and their abilityto adapt to fresh financial applications and types of contracts and assist fi-nancial innovation in the creation or delivery of products and services intoday’s global financial markets.



1.1.1 The concepts of electronic finance and Internet banking

Although electronic commerce in the sense of the production, distribution,marketing, sale or delivery of goods and services by electronic means ishardly new, the growth of trade in goods and services over the Internet hasrightly occupied its very own place in the contemporary economic, legal,and public policy discourse. The unprecedented value of the Internet as amarket for goods and services is largely attributed to the concerted effects ofkey technical properties of the Internet architecture:

• the seamless, costless, reciprocal and interactive transportation of databetween two decentralised units or simultaneously between a givendecentralised unit and any other unit regardless of location

• advanced software which may turn into transportable data anyconceivable format of human intelligence

• computing power and storage capacity at the terminal ends of thenetwork which multiply the value and ‘productivity’ of transportabledata and software applications.

For trade in goods, finance and services, the effects of the Internet have beencatalytic. Constraints associated with geography, time zones and distanceare declining dramatically. Overseas markets become realistically accessible.Transaction and information costs for purchasing or supplying services andgoods across borders are significantly reduced and customers enjoy morechoice and better prices.

In their basic form, banking and financial transactions involve the creation,transfer and settlement of contractual claims. For example, when Bank Alends $100 to Customer B, the subject-matter of the transaction is the deliv-ery of $100 to B and the creation of a debt of $100 that B owes to A (or A mayclaim from B). This contractual claim (i.e. the right of A to request payment)is intangible in nature and does not rely on paper-based vehicles to circulate.It could be evidenced by a document but it does not have to. It may bestored, processed, transmitted and distributed electronically, as a unit ofinformation in the form of digital data. Bank A will simply record a debt of$100 in its computer-based electronic records. It may also transfer this claim(which is a financial asset in its own right) to another bank by simply trans-mitting an electronic message to the new owner of that claim. This simpleform of financial claim may be created, stored, transferred and extinguishedsolely in the form of digital information processed by a computer some-where and transmitted over the Internet. This very essence and property offinancial transactions to exist solely in digital form is what makes the Inter-net a suitable medium for the creation of electronic financial markets.

Electronic finance may be broadly defined as the provision of financialservices and the creation of financial markets using means of electroniccommunication and computation. It involves the use of information tech-nology, telecommunications and computer networks to connect investors,financial institutions, securities markets, rating agencies, their clients andservice providers such as law firms and accountants in a global, 24/7/265,financial market for the movement of securities, capital, currencies and othertypes of financial services and products.



Most people rightly associate electronic finance with the recent revolution inadvanced technologies but, in a strict sense, the use of telecommunicationsfor the delivery of funds or financial services predates the Internet by severaldecades. Domestic and cross-border telegraphic funds transfers appeared inthe mid-nineteenth century, giving rise to legal questions interestingly fa-miliar to the modern electronic banking lawyer: in the 1890 case Bank ofBritish North America v Cooper, 137 US 473 (1890), the bank was sued fordamages for the negligent performance of a transatlantic wire funds trans-fer. Moreover, the US Federal Reserve System performs telegraphic transfersof funds since 1918 and transfers of Treasury securities since 1920 (see theReferences below for the Federal Reserve Bank of New York).

Electronic finance is therefore not all that new. What is new, however, is thescale and unprecedented capabilities of modern electronic networks thathave revolutionised the international financial landscape, creating a globalfinancial marketplace for issuers, investors and financial institutions.

1.2 The Internet and the Securities MarketsIn securities markets, where corporations issue stocks and bonds to inves-tors in return for capital, the Internet has created unique opportunities for abetter and more efficient flow of information and transactional activityamong corporate issuers, investors, analysts and investment banks.

1.2.1 Investors

The Internet provides an unprecedented amount of information to individ-ual investors who use the Internet for obtaining research, market data andthe latest news reports relating to their invested companies or securities.Fund managers and retail investors are increasingly using the Internet toopen and maintain accounts on-line and to place trading orders. Moreover,major securities regulators such as the US Securities and Exchange Commis-sion (www.sec.gov) and the UK Financial Services Authority(www.fsa.gov.uk) have established websites of the highest quality whereinvestors obtain financial information about public issuers, review discipli-nary histories of financial service providers, receive general warnings ofsecurity frauds and lodge complaints.

1.2.2 Issuers

Many corporate issuers are using the Internet to communicate directly withtheir shareholders, potential investors and analysts. They are also using theInternet to assist them in the public offering process. For example, issuersuse the Internet to make information more broadly available to investors inthe form of electronic ‘roadshows’. Roadshows are traditional marketingactivities in which company management meets with investors to explainthe company’s prospects and answer questions in connection with a con-templated securities offering. These meetings have been limited both withrespect to location and number of participants. Providing access to the road-shows over the Internet, both on a real-time and recorded basis, broadensthe number and nature of investors who participate.



Less frequently but equally interestingly, issuers are making offerings ofsecurities to the public directly through their websites without hiring aninvestment bank to underwrite the securities and ensure their sale to thepublic. Because of the marketing and legal risks associated with a direct on-line securities offering, there have been fewer instances of that practice overrecent years. In certain countries, issuers are permitted to use the Internet todisseminate prospectuses and financial information to potential investors.Issuers also are using the Internet to meet their obligation to deliver annualreports and proxy statements to those shareholders who have agreed to re-ceive this information electronically.

1.2.3 Securities firms

Securities firms, such as the major investment banks operating in the securi-ties industry, are mostly using the Internet for marketing and advertisingpurposes, for presenting information on portfolio analysis and market in-formation, and for communicating with and receiving orders from potentialinvestors and customers. Most major securities firms have websites con-taining information ranging from general corporate information to accountopening documents. Capital market analyses, economic data, research in-formation, real-time or delayed information on share and derivative prices,and information on special subjects are also offered.

One of the most visible aspects of electronic finance is online securitiestrading (a topic that will be discussed further in subsequent units of thiscourse). As a brief introductory note, it suffices to say at this stage that secu-rities brokers and dealers use the Internet as a medium to receive from theirclients and transmit to the pertinent market instructions for the sale or pur-chase of securities. Orders are placed over the Internet to a broker-dealer,which in turn sends the trade to the exchange floor through its own or theexchange’s order routing system. This process could be automated in anelectronic market. In addition to serving as a platform for carrying our secu-rities transactions, the Internet has become an important means for securitiesfirms to advertise their financial services and products. This can be accom-plished effectively on their websites or by e-mail, in place of conventionaldirect-mail advertising. Moreover, the Internet enables investors to access anincreasing amount of information related to investments, as securities firmsare actively disseminating research reports, market data, performance indi-cators and other types of relevant information through the Internet.

1.2.4 Securities markets

At present, conventional securities exchanges such as the New York StockExchange (www.nyse.com) are using the Internet primarily as a tool for dis-seminating a variety of information to the public on individual securityprices, trading volume, contract terms, member organisations, tradingmechanisms, margin requirements and exchange rules and for advertisingtheir products and services. Some exchanges provide information on thelisted companies, either in total or in specific market segments. These data-bases could include information about a company’s head office,management, shareholders and financial condition. In addition to communi-



cating with the public, exchanges and other market infrastructure providersare exploring using the Internet for communicating with their members.

In brief, the Internet has transformed every aspect of the securities industryand the international capital markets. It permits the online advertising ofcontemplated capital markets transactions and the interactive solicitation ofpotential investors. It therefore facilitates issuers in overcoming the inherentlimitations of the traditional underwriting process and allows them to reachformerly unreachable sources of capital, regardless of location. Moreover, itenhances the transparency and efficiency of the market through the timelyand convenient communication of the regulatory prospectus and any relatedfinancial and corporate information to interested investors, underwriters orregulators. Further, the Internet has enabled the development of electronicfacilities for securities trading. Electronic markets transcend nationalboundaries and geographic restrictions and open up cross-border marketaccess for financial intermediaries and investors at greater efficiency andlower cost than traditional trading floors.

Of course, the Internet adds value in many other respects. Investors establishpeer-to-peer electronic bulletin facilities that bring together buyers and sell-ers of financial instruments and enable the discovery of prices and tradingintentions. The lack of professional intermediation entails, of course, the fulllist of benefits and risks that are normally associated with ‘do-it-yourself’finance. Further, banks and other intermediaries provide information on theperformance of markets, individual stocks and issuers. They publish theirown research and participate in the wider public policy discourse. Ex-changes use the Internet as a means of advertising their services, operationsand performance. They publish information on their members and commu-nicate their internal rules and by-laws to the financial community.

1.3 The Use of the Internet in the Banking IndustryThe Internet enables the electronic communication between the bank and thecustomer. Electronic banking is broadly defined as the provision of retail andsmall value banking products and services through electronic channels aswell as electronic payments and other wholesale banking services deliveredelectronically. Electronic banking is an ‘umbrella’ term that covers the total-ity of electronic banking applications, services and products that use or relyon electronic devices and means of communication such as the Internet, thepersonal computer or the telephone.

Internet banking involves the provision of electronic banking services via theInternet, normally through a personal computer, although other electronicdevices with Internet capabilities are also being used. The concept of tele-phone banking is self-explanatory. It may not, however, be widely known thatin addition to the automated audio interface, telephone banking may also beperformed through screen-enabled terminals with videotext capabilities.Other terms denoting narrower aspects of electronic banking are less techni-cal. Online banking is currently regarded as synonymous to Internet bankingalthough strictly it probably encompasses any type of electronic banking



service via the Internet or otherwise. Home banking would include any cus-tomer-centred remote delivery channel, including telephone banking.

The Internet affects the banker-customer relationship by enabling the seam-less transportation of data between the bank and the customer. Onlinebanking services and transactions fall into three broad categories:

• banking services in the strict sense, including the acceptance ofdeposits, the performance of funds transfers, which may be sole orperpetual, by way of a standing order and the availability ofstatements of account and transaction history

• the availability of an online interface to apply for and be granted creditfor consumer or business purposes by way of a direct loan, normalcredit card or an overdraft credit facility linked to a current account

• online securities trading activities in which the customer transmits andthe bank receives via the Internet orders for the purchase or sale ofsecurities for the account of the customer (Internet brokerage).

The key driving force of Internet banking has been the convenience of car-rying out online banking transactions. Retail and business bankingcustomers use the Internet as an alternative channel to perform any of thefollowing operations:

• viewing and downloading up-to-date account information on theirsavings, investments and bank debts

• viewing and downloading account balances and itemised transactionalactivity

• verifying the prompt completion of cash deposits and withdrawals• carrying out transfers of funds to a third party bank account• carrying out transfers of funds from and to their own account(s) with

the same or another bank• setting up, amending and cancelling standing orders• viewing, creating, amending or cancelling direct debits• administering their accounts – for example, changing their PINs or

passwords – and ordering cheque books• communicating with customer services personnel.

Moreover, the provision of online credit to consumer and corporate custom-ers may take the form of an unsecured loan, a mortgage or a credit cardpurchased online. Finally, one of the most visible aspects of the electronicfinance industry is online securities trading. Most securities firms havelaunched an online platform for receiving and transmitting their customers’orders for the sale or purchase of securities over the counter or in organisedsecurities markets.

From a business organisation standpoint, online banking services may origi-nate in diverse business structures and be driven by different businessstrategies. The universe of online banks includes established banks that offeronline services to existing customers as an additional method of deliveringtheir core banking services; distinct online banking brands, created by es-tablished institutions, to compete with their traditional ‘brick-and-mortar’affiliates, and a small number of Internet-only banks that provide servicessolely via the Internet without maintaining branch networks.



Reading

You now have three readings, which introduce different aspects of electronic finance andbanking. Your first reading comes from the Journal of Financial Services Research, aleading economics journal which frequently publishes papers on electronic banking andfinance. This paper is one of the first attempts to define the boundaries of electronicfinance as a distinct business segment, to describe the main types of financial servicesand products offered electronically and discuss the benefits and risks of this businessmodel. Please turn to your Reader now, and study the article by Franklin Allen and hiscolleagues, ‘E-Finance: An Introduction’.

Your second reading is sourced from the same journal, and was published in 2002 bythree leading economists who argued that electronic finance was changing the financiallandscape of the world. This paper summarises the global financial trends that have beendriving the financial services industry over the recent years. Now please read Section 2‘Recent Trends in Financial Services’, pp. 30–42, from the article ‘Electronic Finance:Reshaping the Financial Landscape our the World’ by Stijn Claessens and his colleagues.

Finally, we have selected a section from a paper published in 2002 by three economists ofthe US Office of the Comptroller of the Currency, the federal authority responsible for theregulation of nationally chartered banks in the United States. In the section assignedhere, Chapter 3 (pp. 9–16) ‘Internet Banking in the National Banking System’, theauthors briefly describe the range of services offered by online banks in the United States.The selected piece offers a concise summary of the main types of online banking activitiesavailable in the largest banking market in the world. Now please read the chapter byKaren Furst et al.

Review Questions

When you have completed the study of this section and its readings, please try toconsolidate your knowledge and work by answering the following questions:

What were the main economic drives of electronic finance and banking? What is Internet banking, and what types of activities does it encompass? What has the impact of the Internet been on securities markets? Why do Claessens and others argue that electronic finance is changing the financial

landscape of the world? Can you identify how financial markets are being affected?Do you agree with their analysis?

1.4 International Market Developments – ElectronicFinance in Europe and BeyondInternet banking and online securities trading had achieved significantpenetration in most developed countries and key emerging markets, in-cluding India, by 2002 and demonstrated potential for further growth (SeeTable 1.1 for data published by the World Bank). With regard to individualcustomers, demographic factors are the most important determinants of theacceptance of electronic financial tools. A series of empirical studies hasidentified income, education, age and profession to be the most influentialdemographic variables affecting the usage of network technology for per-sonal finance: the typical user of Internet banking is a degree holder, agedbetween 23 and 46, urban, professional and with a relatively high income.

Franklin Allen, JamesMcAndrew and PhilipStrahan (2002) ‘E-Finance: AnIntroduction’, and StijnClaessens, ThomasGlaessner and DanielaKlingebiel (2002)‘Recent Trends inFinancial Services’,both reprinted in theCourse Reader fromthe Journal ofFinancial ServicesResearch; and KarenFurst, William Langand Daniel Nolle(2002) ‘InternetBanking in theNational BankingSystem’, from theCentre for InformationPolicy Research atHarvard University.



Table 1.1 Acceptance of Internet banking amongst the general population

Income Group/Economy

Core InternetBanking

(% of total bankcustomers)

Online Trading (% of total bankcustomers)

Industrial Country Average 8 27 Australia 4 22 Belgium 4 20 Denmark 6 38 Finland 20 ? France 2 18 Germany 12 32 Italy 1 16 Japan NA 32 Netherlands 15 40 Norway 8 25 Portugal 2 7 Singapore 5 10 Spain 2 8 Sweden 31 55 United Kingdom 6 26 United States 6 56 Emerging Markets Average 5 30 Brazil 5 6 India 11 2 S. Korea 13 65 Mexico 3 41

Source: Claessens et al., 2002b

Banks are not required to report specific information about their Internet-based services for regulatory or statistical purposes and therefore the precisemeasurement of the size and business model of the market for Internetbanking and online securities trading is problematic. Available data how-ever, published by various sources, invariably confirm the steady andsizeable growth of the industry, although the exact figures are not alwaysconsistent. According to the directory of European banks maintained byQualisteam, over nine hundred banks across Europe performed online serv-ices over the Internet in 2005. Internet-based services are predominantlyprovided by established banks alongside their mainstream operations,whereas instances of ‘Internet-only’ projects are rare.

Customer acceptance is also on the rise. In mid-2002 figures, one in five bankcustomers performed transactions over the Internet and the figure rose toapproximately one in four among Internet users. The growth of online secu-rities trading has also been considerable, with over five million investorstrading online by the end of 2001. A more recent survey, in 2005, reported anaverage growth rate of users of Internet banking of from 8–10 percent inadvanced European economies, with approximately 50% of all Internet usersmanaging their personal finances online.

The growth of the industry is directly linked to the growth and affordabilityof Internet access and the quality of IT skills and, therefore, it is not spreadevenly across countries. Due to high rates of Internet connectivity andawareness, Internet-based services are particularly popular in the Scandina-vian and Nordic countries. In Sweden, for example, over a quarter of thetotal adult population use the Internet for purposes of personal finance. The



Nordea group, a regional bank operating in the Nordic and Baltic region, isone of the largest online banks in the world with a customer book of over 3.4million online accounts. In the European south, on the other hand, the mar-ket is less developed, although it is growing rapidly. Spain is largelyregarded as the second fastest growing e-banking market with annual ratesof growth in excess of ten percent, whereas Greece has recently seen all ma-jor players, which represent more than ninety percent of the market,developing full interactive and transactional Internet-based services.

In the United Kingdom, France and Germany, industry investment in andcustomer acceptance of electronic finance are predictably high, reflecting theleading position of the three European nations within the global networkand information economy, the favourable customer demographics and theresourceful and competitive national financial centres.

In the UK, it is estimated that between 8 and 10 million bank customers per-form their financial transactions on the Internet. This currently representshalf the population of Internet users in the country. Demand is high inFrance too. The number of customers is estimated at 10–12 million, whereasone in four transactions in the Paris Stock Exchange is currently performedin response to orders routed via the Internet. The size of the German marketis even larger. With nearly 16–18 million bank account holders and over fourmillion investors, Germany accounts for half the European customer base ofInternet-based banking and financial services.

1.5 Electronic Finance Across Borders – A Dynamic Form ofInternational Financial IntegrationThe article you read earlier by Claessens and his colleagues discusses theglobal impact of the Internet, and this section explores further the interna-tional repercussions of electronic finance, starting with a definition offinancial integration.

1.5.1 The concept of financial integration

According to the Oxford English Dictionary, integration is the action orprocess of integrating; the making up or composition of a whole by addingtogether or combining the separate parts or elements; and crucially, the or-ganisation of economic activities so that national boundaries do not matter. Aleading academic text defines economic integration as a state of affairs or aprocess that involves ‘…the amalgamation of separate economies into larger freetrading regions’. The essential elements of perfect international economic in-tegration are the unrestricted movement of goods, persons, services andcapital across national borders.

The global process of economic integration comes close to the notion of eco-nomic globalisation. David Henderson, former chief economist of the OECD,defines globalisation as the free movement of goods, services, labour andcapital, thereby creating a single market in inputs and outputs – and fullnational treatment for foreign investors (and nationals working abroad) sothat, economically speaking, there are no foreigners. Brink Lindsey a scholar



at the Cato Institute, makes a crucial distinction between globalisation as apolitical process, whereby government policies eliminate barriers to freeeconomic movement, and globalisation as an economic process, chiefly trig-gered by developments in information technology and telecommunications.The political process of globalisation through the reduction of policy-basedbarriers establishes the potential for the operation of economic forces. In hisown words, Lindsey sees globalisation in three distinct but interrelatedsenses:

…first, to describe the economic phenomenon of increasing integration ofmarkets across political boundaries (whether due to political ortechnological causes); second, to describe the strictly politicalphenomenon of falling government-imposed barriers to internationalflows of goods, services and capital; and, finally, to describe the muchbroader political phenomenon of the global spread of market-orientedpolicies in both the domestic and international spheres. Since I contendthat globalization in the first sense is due primarily to globalization in thesecond sense, and that globalization in the second sense is primarily dueto globalization in the third sense, I do not think it unduly confusing touse the same word to mean three different things.

(Lindsey, 2001, p.275)

The concept of financial integration is a species of the genre ‘economic inte-gration’. It denotes the economic integration of financial markets andactivities – that is, first, the elimination of legal obstacles to the movement ofcapital, financial services and financial institutions across borders and, sec-ond, the economic and technological forces that facilitate cross-borderfinancial activities, so that with respect to finance, there are no ‘foreigners’within the integrated area.

The political component of financial integration (i.e. the elimination of artifi-cial legal barriers obstructing financial flows, services and institutions) is anessential but not sufficient condition of international financial integration.The archenemy of market integration is geography, not law. Historically, theprincipal causes of the fragmentation of national markets have been dis-tance, poor transport and poor communications. Law-based obstaclesbecame apparent only after various technological advances had renderedthe prospect of trans-national economic relations more economical and real-istic. Advances in information processing, transportation andtelecommunications, the advent of the Internet and, of course, commercialand economic justifications and competitive pressures are all significant de-terminants of international financial integration.

In the ideal form of international integration, national financial markets areperfectly merged into a truly global market. As a result, in the case of perfectfinancial integration the distinction between residents and non-residentswith regard to financial flows becomes absolutely meaningless. In financialmarkets, financial assets are transferred from those who have surplus fundsto invest (‘savers’) to those whose spending exceeds or is going to exceedtheir income and therefore need funds to invest in tangible assets or financetheir current operations or even consume (‘borrowers’). In the middle, finan-cial intermediaries and financial markets facilitate the flow of funds from‘savers’ to ‘borrowers’.



Regarding the mode of financial flows, funds flow from ‘savers’ to ‘borrow-ers’ either directly or via the operations of a financial intermediary. In thefirst case, ‘borrowers’ receive funds directly from ‘savers’. In return, ‘savers’acquire debt, equity or mixed-type claims in the form of primary securities.Financial intermediaries facilitate this process by assisting in the design,marketing and completion of the transaction. A typical example of this proc-ess would be the issuance of a corporate bond by a major corporation, theacquisition of that bond by investors and the transfer of the purchase priceof the bond to the corporation, net of the fees and expenses of the invest-ment banks that facilitated the transaction.

In intermediated financial flows such as bank finance, financial intermedi-aries engage in the business of receiving funds from ‘savers’ and lendingfunds to ‘borrowers’. The flow of funds from intermediaries to ‘borrowers’occurs either in the form of direct financial accommodation or by means ofpurchasing from borrowers primary debt, equity or mixed-type securities. Atypical example of an intermediated financial flow would be the deposit offunds by a depositor in his or her bank and the use of the proceeds of thedeposit by the bank to finance its lending operations.

In its perfect form, international financial integration renders national bor-ders irrelevant for the flow of funds from ‘savers’ to ‘borrowers’. This stateof affairs encompasses all types of financial flows and activities. For exam-ple, in perfectly integrated markets, the transfer of capital in exchange forprimary securities is unrelated to the residence of the parties (e.g. institu-tional investors in Europe buying corporate bonds issued by a companylocated in South Africa). Moreover, trading of marketable securities in sec-ondary markets is also unconnected to the location of the market and theresidence of parties and their intermediaries; for example, an investor inEurope sells his bonds in a South African corporation in the Irish Stock Ex-change where such bonds are listed for trading. Third, in intermediatedfinancial flows, financial intermediaries may receive funds from ‘savers’ andtransfer funds to ‘borrowers’ as well as provide other financial servicesacross national borders, or set up a physical presence in another countryfacilitating financial flows overseas, such as the deposit of funds in a Swissbank by a Greek resident and the loan of money by that Swiss bank to anItalian company. In short, ‘borrowers’, ‘savers’ and intermediaries are ableto engage in financial activities with non-residents without impediments,delays, higher risk, uncertainty and cost when compared to the same trans-action executed domestically.

1.5.2 The state of international financial integration over recent years

During the past twenty years, the growth of financial linkages among na-tions has been phenomenal. On average, foreign assets and liabilities tripledas a share of GDP. More specifically, foreign direct investment increasedfour-fold, portfolio equity assets and liabilities six-fold and debt assets andliabilities 2 _ times. Despite the phenomenal progress, financial integration isspread unevenly. Two-thirds of the global stock of inward FDI representsfinancial flows from and to the developed industrial world, with just fourcountries (USA, UK, France and Germany) receiving the lion’s share of for-eign capital investment. Of the remaining one-third that flows to the



developing world, a group of five countries (China, Argentina, Brazil, HongKong and Mexico) account for more than half. This is a strong indication thatlarge parts of the world remain unable to draw funds from savings overseasand a signal that the integration of financial markets remains incomplete. Acloser look at recent developments in several key components of the inter-national financial system indicates a similar scenario.

International financial integration is strong in the banking sector. The foreignassets of all banks reporting to the Bank for International Settlements – whichinclude claims against non-residents booked by the bank’s headquarters andclaims booked in branches or subsidiaries abroad – totalled more than 17trillion dollars at the end of June 2004, and they continue to grow (BIS, 2004).

Like foreign direct investment, bank lending predominantly originates inand flows to certain parts of the world. Generally, international bank lend-ing appears to be primarily a ‘rich-to-rich’ affair. More than two-thirds of theseventeen trillion dollars of bank claims against non-residents is booked byinternational banks in a handful of developed countries against borrowers inthe same group of rich industrial nations. Less than 18 percent of total banklending has flowed to countries other than the rich industrial nations, andthe actual amount flowing to developing and emerging economies is evenlower. If you disregard the claims booked against offshore financial centres,developing and emerging economies have received a total of 1.6 trilliondollars or a mere 9 percent of the total value of cross-border bank flows. Oncloser inspection, even this amount is actually concentrated in a handful ofemerging markets (South Korea, China, Indonesia, Mexico, Brazil, Argen-tina) while the rest of the developing world, particularly in Africa, remainspractically isolated from the flows of global finance.

In contrast to large-scale corporate or sovereign lending, international finan-cial integration of retail banking services has a long way to go. Retailmarkets are difficult to integrate. Put simply, most consumers and smallbusinesses appreciate proximity and convenience and would rather estab-lish relationships with local financial institutions than seek financial servicesin a distant location, domestically or abroad. A recent study by the FederalReserve has found that 92.4 percent of small businesses in America use adepository institution that is within a distance of 30 miles (Brevoort andHannan, 2004).

Similarly, in the EU, for all the regulatory measures to encourage the estab-lishment of a single market in retail financial services, cross-border loans tothe private sector make up less than 5 percent of the total loan book of Euro-pean banks (European Central Bank, 2004). Similar observations can bemade for the market for bank deposits, savings accounts and residentialmortgages. Despite a far-reaching legislative programme and the emergenceof a single European currency, retail financial markets in Europe remainfragmented.

1.5.3 Electronic finance and international financial integration

Against the background of the aforementioned statistics on the state of in-ternational financial integration, my point for the purposes of this learning



unit is that the Internet and electronic financial applications can facilitatecross-border financial flows and trade in financial services across borders.

The Internet enables the swift transmission and reception of informationover computer networks and may therefore eliminate the constraints of dis-tance and geography on the creation, administration and transfer ofintangible claims. As already noted, the archenemy of market integration isgeography, not law. Law-based obstacles became apparent only after trans-national trade had become a realistic prospect. Network technologyeradicates the constraints of geography and distance in the movement ofdigital data that do not require storage facilities, packages, docks, motor-ways or airports to circulate. The basic idea is that the Internet may functionas a potential catalyst, alongside other macroeconomic and legal develop-ments, towards more open, integrated and more vibrant financial marketsand a better-performing single financial area, particularly in Europe wherethe European Union has been working to establish a single European finan-cial market over the last fifty years.

Banking and financial services are information-intensive and intangible,whereas the Internet enhances transparency and the convenient transmis-sion of and access to information. If used properly, the Internet could serveas a facilitator of cross-border banking and financial activities and relation-ships between banks and their customers. Every single aspect of the banker-customer relationship may take place online, including initial advertisingand marketing, pre-contractual enquiries, the formation of the contractualbond and the performance, administration and settlement of contractualobligations. The availability of cross-border banking and financial servicesvia the Internet could have a number of important benefits for consumersand financial institutions.

On the Internet the volume and quality of available information on suppli-ers, services and prices, and the accuracy and convenience in the discoveryof information are the joint components of an open marketplace of unprece-dented transparency, regardless of borders or the location of marketparticipants.

Combined with the growing sophistication and information appetite of de-positors, borrowers or investors, transparency enhances competition, leadsto better pricing, empowers customers and contributes towards a ‘levelplaying field’ for small firms and individuals vis-à-vis larger borrowers,investors or depositors. Internet-based services are capable of liberating thisprocess from constrains of time, geography and distance, spreading financialcompetition across borders.

The Internet enhances banks’ access to cross-border markets and customers’access to cross-border services. For banks, it opens up vital market opportu-nities abroad. For savers, borrowers and investors, it enlarges the pool ofavailable capital, increases choice in diverse and innovative services andenables the geographical spread and diversification of credit, savings andinvestment portfolios with beneficial effects for performance and growthwhich are desperately needed in the emerging macroeconomic environmentof adverse demographics, fiscal constraints and state welfare discipline.



Further, it enables the active recipient of services to seek better financial so-lutions in other, probably more efficient, financial markets from the comfortof his or her desk. Without the Internet, consumers may interact with for-eign financial institutions only to the extent that they are able to travel. TheInternet rectifies this largely unsatisfactory situation, enabling less mobileconsumers or residents in countries that do not usually attract foreign finan-cial firms to go directly to the preferred source of capital and services.

Automation of services and processes, the standardisation of products andthe opportunity to develop a single marketing strategy from within a singleoperational unit trim down the costs of providing domestic and cross-borderservices, produce efficiency gains, lead to economies of scale, facilitate entryinto the market and thereby enhance competition with potential financialbenefits, including lower commissions, lower or higher rates of interest forcredit and savings respectively and a resurgence of excellence and innova-tion in services and operations. In particular relation to fee-generatingactivities, most notably securities trading, cost savings resulting from themigration to Internet-based services have verifiably been passed on to cus-tomers in the form of reduced commissions.

For customers and banks in smaller and less economically advanced coun-tries, the benefits of cross-border electronic finance may go even further. Theavailability of Internet-based services originating overseas will stimulatecompetition and unleash dormant domestic forces towards reform andmodernisation of operations and services. Domestic customers will enjoy theconvenience of Internet-based banking and finance which poorly perform-ing domestic firms may have failed to provide. Most pertinently, cross-border provision of services via the Internet may stimulate local economicgrowth and development:

• reaching remote and isolated communities and thereby enhancing theefficiency or affordability of available microfinance

• providing foreign investors with direct access to local financialmarkets through online securities trading services exported by localintermediaries

• providing dynamic local businesses with access to wider pools ofcapital and better performing or innovative financial services

• offering a convincing alternative strategy or a market testingopportunity for banks wishing to expand across borders but currentlydissuaded by the high cost associated with a physical presence

• possibly also encouraging businesses from wealthier countries toinvest in less developed countries, creating jobs and tax revenue in theassurance that the trusted services of banks in their home country areonly a ‘click’ away.

A similar argument can be made with regard to the movement of naturalpersons for purposes of employment, studies or retirement to a countryother than their own. Expatriates can now enjoy their new lifestyle in theirnew home without foregoing the long and trusted relationship with theirfinancial adviser, bank or investment firm, which are all readily accessibleonline.



1.6 Essential Institutional and Legal ConditionsElectronic commerce in financial services cannot and does not operate in alegal vacuum. It needs and makes use of the general legal and institutionalframework within which online banks operate, including the rule of law, thenational court system, efficient commercial laws, banking and financial laws,regulatory and supervisory standards of consumer and investor protection,monetary policy, safety and solvency of the banking system, data protection,privacy laws, and the laws relating to information safety and security.

In the next unit of this course, we will examine the core legal frameworkrelating to electronic financial and banking activities. For the purposes ofthis unit, you should keep in mind that advances in technologies in them-selves are not sufficient to create markets – any kind of markets. Theprovision of financial services via the Internet, especially, requires an effi-cient legal and regulatory framework, which creates confidence amongfinancial institutions and their customers that the undertaken promises willbe kept and that the contractual arrangements will be performed.

The architecture of the Internet is deliberately minimalist. Its protocols areindifferent to the geographical origins or destination of the data, their con-tent, the purpose of transportation or whether the originator or the recipientof data has a legitimate claim upon them. It was intended for research, notsocial control, financial services or trade, and therefore it reflects a politicaldecision to disable control and a technical decision to stimulate speed andefficiency in the circulation of data.

Take the retrieval of account data from the bank’s website. To the server,where the website is hosted and towards which the customer transmits herrequest for the delivery of data, the Internet protocol does not reveal any-thing other than the IP address of the customer’s computer. On thatinformation alone, the Internet protocol is designed to ensure that data willbe copied and delivered as requested. Although ingenious for facilitating thefree circulation of content, this minimalism is useless for purposes of socialcontrol and a major source of risk in the business of banking. For that rea-son, control of access or content is imposed peripherally through the use ofaccess control devices such as passwords and PINs (Personal IdentificationNumbers) by the individual components comprising the architecture of theInternet, at their will, normally in no prior bilateral or multilateral consulta-tion or coordination, and without the core Internet protocol being otherwiseaffected.

Electronic finance and banking lies at the heart of the tension between ‘freeflow of data’ and ‘legal or social control’ in a paradoxical way. Few data-intensive activities could benefit more from the open-source structure of theInternet architecture; and hardly any other activity is subject to so manylayers of legal control and so many laws and regulations which, more oftenthan not, must be implemented by banks themselves through self-imposedmechanisms of access control and network security. It is not always clearhow best to reconcile the two competing claims. The properties of the coreInternet protocol point towards further integration but cannot conceal the



many political, institutional and legal forces that point in exactly the oppo-site direction.

Mancur Olson demonstrated that when sound legal foundations are lacking,commercial transactions tend to concentrate in spot markets where personaltrust and confidence replace law enforcement in safeguarding that the un-dertaken obligations will be honoured (Olson, 2000, page 186). Conversely,the absence of personal relationships in transactions at a distance leaves agap that must be filled by the parties’ confidence in the quality of the legalframework or (perhaps) by the high benefits of the project, which renderhigh legal risks worth taking.

Put simply, bank customers will always do their banking business with fa-miliar local brands. They will never sign up to the Internet service of adistant provider unless either

a) the distant online bank outperforms local institutions in thefinancial benefits offered, such as a very attractive interest rate onconsumer loans, thus rendering the assumption of additional risksworthwhile, or

b) the legal framework is so efficient and sound that distance does notmatter as far as the legal protection afforded to consumers isconcerned.

Cross-border Internet banking upsets the legal status quo in two respects.First, as a form of cross-border trade in financial services, it does not fitneatly into the applicable legal framework, which was designed decades agofor regulating market access by way of local establishment. Second, as aform of banking service, it is provided over a delivery channel that presentsa new range of risks. Unless this tension is settled and market players areassured that departure from their familiar local markets will not be penal-ised by unacceptable levels of legal risk, the prospects of the project areunpromising. This is not an easy task but we will see in the subsequentlearning units how this tension is resolved in various parts of the world.

Reading

From your course textbook Internet Banking and the Law in Europe, please read theIntroduction and first chapter. There will be very little new information in those pages.The aim of this reading assignment is to consolidate what you learned about this excitingindustry in this first unit of the course. You are now ready to go to the next one, wherewe will discuss the fundamental legal aspects of electronic finance.

1.7 Concluding RemarksThis first unit is intended to offer an introduction to the services, productsand applications collectively known as electronic finance and Internetbanking. We described the services and products of electronic finance, thegrowth of the market and recent trends, its importance and position in theglobal financial industry and how it could facilitate international financialintegration with increasing benefits for financial institutions, investors, con-sumers and depositors as well as the economy as a whole.

Apostolos Gkoutzinis(2006) InternetBanking and the Lawin Europe,‘Introduction’ andChapter 1 ‘InternetBanking in Europe:Basic Concepts andRecent Trends’.



We also briefly indicated that the market for electronic finance, like anyother market, requires a solid institutional and legal framework to thrive.This subject will be examined in the next unit. For now, you have workedhard and deserve a break.



References and WebsitesAllen, Franklin, James McAndrew and Philip Strahan (2002) ‘E-Finance: AnIntroduction’, 22 Journal of Financial Services Research 5–27

BIS (2006) 2005 Annual Report, consolidated banking statistics, 2nd quarter,Basel: Bank for International Settlements.

Brevoort, Kenneth P. and Timothy H. Hannan (2004) ‘Commercial Lendingand Distance: Evidence from Community Reinvestment Act Data’,Washington DC: Board of Governors of the Federal Reserve System Finance andEconomics Discussion Series 5.

Claessens, Stijn, Thomas Glaessner and Daniela Klingebiel (2002a)‘Electronic Finance: Reshaping the Financial Landscape around the World’,22 Journal of Financial Services Research 29–61

Claessens, Stijn, Daniela Klingebiel and Thomas Glaessner (2002b)Electronic Finance: A New Approach to Financial Sector Development?Discussion Paper 431, March, Washington DC: World Bank.

European Central Bank (2004) ‘Report on EU Banking Structure’, 10,Frankfurt am Main: European Central Bank.

Federal Reserve Bank of New Yorkhttp://www.ny.frb.org/pihome/fedpoint/fed43.html

Furst, Karen, William W. Lang and Daniel E. Nolle (2002) ‘InternetBanking: Developments and Prospects’, Centre for Information PolicyResearch at Harvard University, April, available athttp://www.occ.gov/netbank/ebankingdpapr02.pdf .

Gkoutzinis, Apostolos (2006) Internet Banking and the Law in Europe,Cambridge UK: Cambridge University Press.

Greenspan, Alan (2000) Remarks at the Financial Markets Conferencesponsored by the Federal Reserve Bank of Atlanta, Sea Island, Georgia (viavideoconference), October 16, available athttp://www.federalreserve.gov/BoardDocs/Speeches/2000/20001016.htm .

Lindsey, Brink (2001) Against the Dead Hand: The Uncertain Struggle forGlobal Capitalism, New York: Wiley.

New York Stock Exchange (www.nyse.com)

Olson, Mancur (2000) Power and Prosperity: Outgrowing Communistand Capitalist Dictatorships, New York: Basic Books.

UK Financial Services Authority (www.fsa.gov.uk)

US Securities and Exchange Commission (www.sec.gov)

laws and regulation of electronic finance

Documents