Once again very senior figures are proposing that the scale and structure of very large financial institutions be reconsidered. Nearly every major regulatory leader has raised the question, as have many economists across the political spectrum and in both the United States and United Kingdom. To explore, one can start here and here; I...
At the Buttonwood Conference sponsored in New York by the Economist, Governor of the Bank of England Mervyn King just gave an elegant and candid speech in which he noted that policymakers might even have to look at splitting up the very large banks–an approach many observers, including me, believe is essential for managing...
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...
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...
The Journal of Regulation & Risk North Asia has just published its issue for the Summer/Autumn 2010. Do not be misled by the title: a sign of these global times is that the issue is full of mutually relevant commentary on issues concerning US, European and international financial regulation and is going to be...
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...
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...
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....
Readers may have noticed today’s WSJ article on a set of studies suggesting that the relationship between capital levels and the costs of loans is less significant than the banking industry contends. (Naturally, the Journal provides no links. I’m assuming the article is referring to this study by Kashyap, Stein, and Hanson and this...
One of my favorite commentators and the coauthor of one of the most important books on the recent financial crisis, James Kwak, has just posted a profound and timely addition to his blog. He notes the developing interest in behavioral economics and the importance of understanding irrationality in decisionmaking, most prominently by my pathbreaking...
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