Narrow banking

Restricting fractional reserve banking
Higher reserve requirements such as Adair Turner's 20% reserve requirements

Miilton Friedman proposal
Banks are separated into two separate types of institutions:


 * 100% reserve banks that cannot lend.  They just hold depositor's money, and can invest it in Treasuries or hold it in reserves at the central bank,  but no lending is allowed
 * Lending institutions that allow borrowing for mortagaes or loans to businesses.  This would be funded by shareholders, and no new money creation would occur.  They would merely be the intermediary for stockholder money.

Ben Dyson and Andrew Jackson book
Modernizing Money:Why our Monetary System is Browken

Disaggregated Banking
After repeal of banking regulations (eg repealing Glass Stiegal in the US), banks began to aggregate several functions, some of which created conflicts of interest. EG: Bear Stearns was making markets in debt securities, represented clients who were packaging those securities, as well as advising consumers of such securities on their investment decisions. So they were not just dealer, but representing parties on both sides of the transaction. What could possibly go wrong.

Some economists such as John Kay, (See esp. page 39 on in his essay "Narrow Banking: The reform of banking regulation") advocate divesting out the aggregated functions into separate companies. The functions:
 * Investment banking
 * Debt sellor representative (A small business attempting to float a bond either in the domestic or foreign market, and properly hedging any forex risk exposure).
 * Debt vendor- Packaging, or monetizing debt for resale, for example securitizing mortgage debt into tranches.
 * Money Market dealer (forex trader, trader in credit default swaps, hedging products)
 * Investment advisor, representing small investors looking to store money with higher returns in money market products.
 * Retail (passbook, eftpos) banking
 * Retail lending (mortgages, car loans)