Some Economics of Banking Reform

Nov 2012 | 632

Authors: John Vickers

Where do we stand, five years on from the start of the crisis, on progress towards banking reform? Major advances have been made, but a lot of unfinished business remains, notably on structural reform of banks. Following a stock-take of current reform initiatives, the paper reviews some economics of public policy towards banks, starting with the rationale for deposit guarantees and lender-of-last-resort support but concentrating on why governments feel compelled to provide solvency support in crisis. It then covers the economics of capital requirements

JEL Codes: G21, G28, L51

Keywords: Banking, bail-outs, capital requirements, deposit guarantees, Glass-Steagall, resolution, ring-fencing, structural reform, Volcker rule

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