IN RECENT YEARS many financial service firms in the United States and other industrialized countries have not prospered. Public confidence in the health of the U.S. banking system has declined as bank losses and failures have increased throughout the 1980s. Yet the record of U.S. banks, aside from their reported failures, is not so different from those in other countries. Banking troubles are not uniquely American. In the past fifteen years banking and other financial service markets have undergone fundamental changes. In many cases national markets have moved from relatively stable environments, in which various types of firms operated in segmented markets protected by high regulatory barriers, to more fluid environments, in which market barriers are less restrictive and thus promote greater competition. The changes were often implemented through moves away from a relationship-based system of financial intermediation to one in which explicit market-based transactions predominated.