Yogi Berra advised that “when you come to a fork in the road, take it.” This is where globalization is going. The full significance of globalization sometimes still eludes us. It takes events, such as the sudden near economic collapse of whole countries, from Iceland and Greece to Ireland, the collapse of long-standing regimes like…
This weekend the G20 Summit takes place in Seoul. The Basel III enhanced capital requirements (among other standards) come up for adoption. Even as seasoned present and former regulators, such as Mervyn King and Paul Volcker, suggest that the new standards might not be sufficient, bank CEOs such as Mr. Pandit of Citigroup and Mr.…
Brooke Masters describes in today’s Financial Times how the original ambition of global regulators, in the midst of the Great Financial Crisis, to develop a unified and determined approach for addressing global financial stability and averting financial crises has steadily degenerated into a diaspora of different approaches by various countries and regions. In her commentary,…
There is much positive publicity about the new rules agreed upon at the Basel Committee. And there is no doubt that on their face they are much stricter than the old ones, requiring banks to double their level of real core capital and add a buffer of 2.5%. This means that, while banks could use…
Before anyone ever discusses the subject again, or listens to another banker bellyaching about how increased capital requirements will slow down economic growth and hurt everybody, he or she must read the scholarly study by an international group of researchers entitled “Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity…
Here is Planet Money (including our Duke Law alumna, Barbara Matthews) on what’s going on at Basel. This is more important than most realize because the rules being developed internationally will apply to US banks, and they are about the most important ones there will be. Round rooms, not smoke-filled (anymore), but obscure and windowless…
Yesterday I noted that the Basel Committee and the Financial Stability Board had issued reports challenging the complaints of bankers that stricter bank capital and liquidity rules and demonstrating the the proposed rules would make for healthier economic growth. I asked the question whether this might signal progress in banking regulation in the face of…
Many banking leaders have been whining incessantly about how proposed new capital and liquidity requirements will adversely impact GDP and reduce credit. This is an old canard raised by almost every industry when facing new regulation. The logic is about as convincing as arguing against restricting drunk driving because this will reduce gasoline consumption. Yet…
There are no silver bullets or easy blueprints for fixing the convoluted financial system. The reforms pending in Congress, even after a brutal legislative process, will only address some of the important elements, and then only in ways that remain debatable and subject to regulatory interpretation. So it is easy, if often unfair, to pick…
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