The UK’s Independent Commission on Banking set out to make banking safer, to ensure that what just happened won’t happen again, and to change both the structure and regulation of banking as needed. But this column argues that the Commission fails to achieve any of these aims. It instead proposes a new way to make the financial system and wider economy safer.
Laurence J. Kotlikoff, Friday, October 26, 2012
Viral Acharya, Tuesday, October 25, 2011
The Vickers Commission recommends separating commercial and noncommercial banking activities in order to protect core financial functions from riskier activities. This column warns that such ring-fencing may fail because there are still incentive problems in traditional banking activities. The accompanying risk-weighted capital requirement recommendations will address this only if we do a better job of measuring risks.