Fear and Greed

The Interim Report of the UK Independent Commission on Banking was released yesterday.  In his opening remarks, Commission’s chairman Sir John Vickers enunciated three key points. First, banks need to hold more capital.  According the Commission, the Basel III proposal of 7%–possibly more for especially large and important banks–is a step in the right direction.  … Read moreFear and Greed

Forum shopping

The Financial Times reports that Oswald Grübel, chief of the Swiss bank UBS, “…has attacked the UK government for its public neglect of the City of London, warning that tougher regulations will see Britain and the rest of Europe cede investment banking business to Asia and the US.” Yes, by all means, let’s not overdo … Read moreForum shopping

More capital

The Financial Times reports that a study conducted by Bank of England researchers finds that the current level of risk-weighted capital held by banks (about 7 percent) is woefully inadequate to protect against future financial crises.  Calibrating their model with data from 1821-2001, the authors find that an astounding 53 percent capital to risk-weighted assets … Read moreMore capital

Two Cheers for Basel III…or Waiting for Basel 3.5

Citibank chief Vikram Pandit warns in the Financial Times against excessive increase in capital and liquidity requirements.  This is a tough argument to make in the aftermath of a serious crisis in which banks and other financial institutions were caught short on both counts. The op-ed below was co-authored with Masami Imai,  who is is … Read moreTwo Cheers for Basel III…or Waiting for Basel 3.5

Make them pay…make them pay

Carried away by ever-rising real estate prices and aided and abetted by new types of financial instruments, the financial system’s overindulgence in risk has left taxpayers with a nasty hangover, a hefty tab, and a desire to make someone pay. Commentators have blamed the financial meltdown on the attitude towards risk generated by banks’ corporate … Read moreMake them pay…make them pay