Why Bank Separation Must Complement the Leverage Ratio

  • Adrian Blundell-Wignall
  • Paul Atkinson
  • Caroline Roulet


The authors’ empirical evidence is used to show that there is no reasonable capital rule that can protect the financial system in the face of events like 2007–2008: large interconnected banks would need 4 times the amount of capital to avoid default without government aid. They argue that separating deposit-guaranteed banks from investment banking, while maintaining a leverage ratio, is the policy mix supported by empirical evidence. They suggest the best threshold for separation should be derivatives exposure (with no netting) at or above 10%. They compare their own legal separation proposal to the Volcker rule, the UK Vickers rule and to those European proposals that were quietly dropped to please banks. They rebut 5 criticisms of separation proposals and review the 2017 Mnuchin Treasury modification of the Volcker Rule.


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Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Adrian Blundell-Wignall
    • 1
  • Paul Atkinson
    • 2
  • Caroline Roulet
    • 3
  1. 1.University of Sydney and OECD (consultant advisor to the Secretary General, and former Director of the Financial and Enterprise Affairs Directorate)ParisFrance
  2. 2.NHA Economics, Ltd.ParisFrance
  3. 3.Organisation for Economic Co-operation and DevelopmentParisFrance

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