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Post-crisis challenges to bank regulation
[Dividends and bank capital in the financial crisis of 2007–2009]

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  • Xavier Freixas

Abstract

The current crisis has totally transfigured the world’s financial landscape. The lessons we have derived have also transformed our perception of banking risks, contagion and its implication for banking regulation. It is now well established that risks were mispriced, accumulated in neuralgic points of the financial system, were amplified by procyclical regulation and the instability and fragility of financial institutions. Yet the implications on the design of post-crisis banking regulation are unclear. In this article we summarize the key issues the new regulatory framework have to consider and how they relate to one another. As the debate over the new financial regulation architecture has evolved, two different views seem to emerge: one views banking crises as an unavoidable phenomenon, so that regulation should provide a framework to cope with its impact. The other considers that crisis could be avoided provided banking regulation is duly modified. We argue that for consistency reasons choosing one view or the other leads to a completely different perspective on the future of banking regulation, as it implies a different view on the banking industry, bank stakeholders’ rights, banks’ corporate governance and contagion. As a consequence, choosing the incorrect view of banking crises may lead to an inefficient banking industry.— Xavier Freixas

Suggested Citation

  • Xavier Freixas, 2010. "Post-crisis challenges to bank regulation [Dividends and bank capital in the financial crisis of 2007–2009]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 25(62), pages 375-399.
    • Handle: RePEc:oup:ecpoli:v:25:y:2010:i:62:p:375-399.
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    File URL: http://hdl.handle.net/10.1111/j.1468-0327.2010.00241.x
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    Cited by:

    1. Gutiérrez López, Cristina & Abad González, Julio, 2014. "¿Permitían los estados financieros predecir los resultados de los tests de estrés de la banca española? Una aplicación del modelo logit," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 17(1), pages 58-70.
    2. Syed Moudud-Ul-Huq & Rabaka Akter & Tanmay Biswas, 2020. "Impact of Financial Crisis on Credit Risk: Pre- and Post-financial Crises 
in an Emerging Economy," FIIB Business Review, , vol. 9(2), pages 118-132, June.
    3. Yiannis Anagnostopoulos & Jackie Kabeega, 2019. "Insider perspectives on European banking challenges in the post-crisis regulation environment," Journal of Banking Regulation, Palgrave Macmillan, vol. 20(2), pages 136-158, June.
    4. Ulrich Suntum & Cordelius Ilgmann, 2013. "Bad banks: a proposal based on German financial history," European Journal of Law and Economics, Springer, vol. 35(3), pages 367-384, June.
    5. Capponi, Agostino & Dooley, John M. & Oet, Mikhail V. & Ong, Stephen J., 2017. "Capital and resolution policies: The US interbank market," Journal of Financial Stability, Elsevier, vol. 30(C), pages 229-239.
    6. Carbajal-De-Nova, Carolina & Venegas-Martínez, Francisco, 2019. "On the paradigm shift of asset pricing models, before and after the global financial crisis: a literature review," Panorama Económico, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 15(29), pages 7-38, Primer se.
    7. Alexander, Gordon J. & Baptista, Alexandre M. & Yan, Shu, 2021. "Regulation of bank proprietary trading post 2007–09 crisis: An examination of the Basel framework and Volcker rule," Journal of International Money and Finance, Elsevier, vol. 119(C).
    8. Meynhardt, Timo & von Müller, Camillo, 2013. "„Wir wollen Werte schaffen für die Gesellschaft“ – Der Public Value im Spannungsfeld zwischen Aktienwert und Gemeinwohl. Eine Fallstudie am Beispiel der Deutsche Börse AG," ZögU - Zeitschrift für öffentliche und gemeinwirtschaftliche Unternehmen, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 36(2-3), pages 119-149.
    9. Michael Diemer & Uwe Vollmer, 2015. "What makes banking crisis resolution difficult? Lessons from Japan and the Nordic Countries," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 251-277, December.

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