Jacopo Carmassi, Stefano Micossi, 28 March 2012

Excessive risk-taking by large banks was among the main causes of the 2008–09 financial crisis. This column argues that the antidote to excessive risk-taking should come from the elimination of the subsidies of the banking charter and the implicit promise of bailout in case of major losses, and the introduction of strong incentives for management and shareholders to preserve the capital of their bank. This requires deep changes in Basel prudential rules.

Adrian Blundell-Wignall, Paul E Atkinson, 29 February 2012

It wasn’t long ago that people were blaming banks, not governments – and the issue of the day was financial regulation, not fiscal compacts. This column, the second of two, focuses on the Basel framework for banking regulation that it argues has led to a ‘vast, poorly diversified, highly interconnected banking system’. In this section it outlines how to put this right.

Charles Goodhart, Enrico Perotti, 29 February 2012

Banking runs are a major threat to modern finance. This column makes the case for preventive tools over ex post intervention. It argues for assigning responsibility and novel tools to microprudential regulators for supervising individual liquidity and capital ratios, and to central banks those tools for aggregate liquidity-risk management, with overall control switching to fiscal authorities once intervention appears to require fiscal means.

Adrian Blundell-Wignall, Paul E Atkinson, 28 February 2012

Amid the chaos of the Eurozone crisis, the debate over how to fix the banking system has been pushed to one side. This column, the first of two, aims to bring banking regulation back to the centre of attention. It argues that the Basel III regulations currently being proposed are already desperately out of date.

Avinash Persaud, 23 September 2011

The financial crisis revealed substantive problems that need to be solved, especially in the banking sector. This column argues that Basel III, the new accord on international banking, is an overdue step in the right direction. It should be defended against attempts by bankers and their friends to cut it down, dilute it, and postpone it.

Viral Acharya, 17 June 2011

Viral Acharya of New York University talks to Viv Davies about capital requirements and measuring systemic risk. Acharya describes the development of the NYU Stern systemic risk rankings of US financial institutions and what he considers to be the dismal failure of the Basel risk-weight approach to addressing systemic risk. He cautions against the blanket call for more capital and instead recommends for more capital against systemic risk contributions of financial firms. He also discusses the shadow banking sector and how banking risk and sovereign risk are becoming dangerously intertwined. The interview was recorded in London on 2 June 2011. [Also read the transcript]

Hyun Song Shin, 25 March 2011

Hyun Song Shin of Princeton University talks to Viv Davies about his current work on global liquidity and highlights the paradox of how the US, while being the largest net debtor in the world, is also a substantial net creditor in the global banking system. They also discuss the Basel III requirements, bank capital ratios and the lending capacity of bank equity. Shin stresses the importance of international coordination to the success of financial and regulatory reform. The interview was recorded in Washington DC in March 2011 at the IMF conference, ‘Macro and Growth Policies in the Wake of the Crisis’. [Also read the transcript]

Nicolas Véron, 19 November 2010

The endorsement of the Basel III accord on financial regulation at the recent G20 meetings in Seoul represents one of the event’s main outcomes. This column argues that while this initiative should be welcomed, global finance cannot realistically be submitted to a single rulebook and significant challenges remain.

Viral Acharya, 20 August 2010

Viral Acharya talks to Viv Davies about the Dodd-Frank Act and his recent work on capital requirements, market-based measures of systemic risk and stress tests. He highlights the new NYU Stern Systemic Risk Rankings of US financial institutions, which use the Marginal Expected Shortfall (MES) as its basis. Acharya discusses the shortcomings of the Basel III proposals and compares the recent European stress tests with those undertaken in the US. He highlights the importance of international coordination in the areas of derivatives, and agrees that financial reform compliance will require a cultural shift in the banking system.

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