David Miles, 25 February 2011

David Miles of the Bank of England's Monetary Policy Committee talks to Viv Davies about ‘Monetary Policy in Extraordinary Times’, a speech he delivered in London on 23 February 2011. Two very large shocks have hit the UK economy – the near collapse of the banking system and, more recently, a sharp increase in commodity, energy and food prices. The first shock is deflationary, the second inflationary. Miles discusses how best to set monetary policy in the wake of these shocks and analyses how regulation and monetary policy can most effectively reduce the likelihood of future financial instability. [Also read the transcript]

Avinash Persaud, 13 June 2009

There is a strong consensus that banks had insufficient reserves set aside for a rainy day and that they should be required to hold more capital. This column says we should differentiate institutions less by what they are called and more by how they are funded. Encouraging individual risks to flow to those who can absorb them would make the system safer and introduce new players with risk capacities.

Enrico Perotti, Javier Suarez, 11 February 2009

Most financial system reform proposals rely on better managed, anti-cyclical capital requirements, or some sort of insurance. This column argues that mandatory liquidity insurance would be more effective. The insurance premiums – linked to maturity mismatch and term structure – would essentially be pre-payment for the cost of future financial crises and held in an Emergency Liquidity Insurance Fund.

Hans Gersbach, 07 September 2011

Current regulation imposes fixed capital requirements on banks. However, this makes it impossible to use regulatory capital as a buffer against negative macroeconomic shocks. This column explains how this paradox could be resolved by basing capital requirements each year on average bank equity capital in the industry.

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