Some economics of banking reform

Vickers J

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

Keywords:

structural reform

,

deposit guarantees

,

resolution

,

banking

,

ring-fencing

,

bail-outs

,

Volcker rule

,

Glass-Steagall

,

capital requirements