Can We Make Global Banks Safer? A Practitioner’s View
- 12 Downloads
Since the banking crisis of 2008, big international banks have been considered a threat to financial stability. These banks are under a regulatory pressure that goes farther than the new Basel rules. Regulators are trying to reduce their international interconnectivity, they are trying to tackle the problem of ‘too big to fail’, and they are looking at ways to split the retail banking activity from their activities in the wholesale markets. This uncoordinated approach from three angles often makes the debate confusing and incoherent. Moreover, the value added that international banks potentially bring to the globalized economy is neglected. This article gives an overview of the advantages of having big international banks in normal times and the risks that such banks pose to society in times of crisis, and proposes an appropriate regulatory treatment that should reduce the risks while retaining as many of the advantages as possible.
Keywordsbanking crisis bank regulation
JEL ClassificationsG210 G280
- Blundell-Wignall, A, Wehinger, G and Slovik, P . 2009: The elephant in the room: The need to deal with what banks do. OECD, Financial Market trends Vol. 2009/2.Google Scholar
- de Larosière, J . 2009: The high level group on financial supervision in the EU at http://www.ec.europa.eu/internal_market/finances/docs/de_larosière_report_en.pdf, accessed 25 February 2009.
- ESRB. 2013: Recommendation on intermediate objectives and instruments of macro prudential policy. Official Journal of the European Union. 15 June (ESRB/2013/1/) (2013/C 170/01).Google Scholar
- FSB. 2012: Recovery and resolution planning: Making the key attributes requirements operational, 2 November 2012.Google Scholar
- Goodhart, C and Schoenmaker, D . 2009: Fiscal burden sharing in cross border banking crisis. International Journal of Central Banking. March 2009, pp. 141–165.Google Scholar
- Haldane, A . 2012: The dog and the Frisbee, speech at http://www.bis.org/review/r120905a.pdf.
- IMF. 2005: Global Financial Stability Report, IMF: Washington DC.Google Scholar
- IMF. 2013: Financing future growth: The evolving role of banking systems in CESEE. Central, Eastern and South-Eastern Europe–Regional Economic Issues, IMF: Washington DC.Google Scholar
- Lamfalussy, A . 1989: Globalization of financial markets: International supervisory and regulatory issues. Federal Reserve Bank of Kansas, Economic Review 74 (1): 3–8.Google Scholar
- Liikanen, E . 2012: Report of the high level expert group on reforming the structure of the EU banking sector at http://www.ec.europa.eu/internal_market/bank/docs/high-level/expert_group/report_en.pdf.
- Masson, P . 2001: Globalization: Facts and figures. IMF policy discussion paper PDP/01/4, October.Google Scholar
- Ostry, JD, Ghosh, AR, Habermeier, K, Laeven, L, Chamon, M, Qureshi, MS and Kokenyne, A . 2011: Managing capital inflows: What tools to use? IMF staff discussion note SDN/11/06, April.Google Scholar
- Persaud, A . 2012: The economic consequences of the EU proposal for a financial transaction tax. Intelligence Capital. March, p. 16.Google Scholar