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A framework for banking structural reform

A framework for banking structural reform

The 2007-08 crisis revealed regulatory failures that had allowed the shadow bank operating system and systemic risk to grow unchecked. This column evaluates recent proposals to reform the banking industry. Although appropriate pricing of risk should make activity restrictions redundant, there may nevertheless be complementarities between both of these approaches. Ring-fencing could make banking groups easier resolvable and for that reason lower the price of imposing market discipline.