Making Banks Safer: Can Volcker and Vickers Do It?
AbstractThis paper assesses proposals to redefine the scope of activities of systemically important financial institutions. Alongside reform of prudential regulation and oversight, these have been offered as solutions to the too-important-to-fail problem. It is argued that while the more radical of these proposals such as narrow utility banking do not adequately address key policy objectives, two concrete policy measures - the Volcker Rule in the United States and retail ring-fencing in the United Kingdom - are more promising while still entailing significant implementation challenges. A risk factor common to all the measures is the potential for activities identified as too risky for retail banks to migrate to the unregulated parts of the financial system. Since this could lead to accumulation of systemic risk if left unchecked, it appears unlikely that any structural engineering will lessen the policing burden on prudential authorities and on the banks.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 11/236.
Date of creation: 01 Oct 2011
Date of revision:
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-28 (All new papers)
- NEP-BAN-2011-11-28 (Banking)
- NEP-CBA-2011-11-28 (Central Banking)
- NEP-REG-2011-11-28 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Inci Ã–tker & Aditya Narain & Anna Ilyina & Jay Surti, 2011. "The Too-Important-to-Fail Conundrum: Impossible to Ignore and Difficult to Resolve," IMF Staff Discussion Notes 11/12, International Monetary Fund.
- Jonathan Fiechter & Inci Ã–tker & Anna Ilyina & Michael Hsu & Andre Santos & Jay Surti, 2011. "Subsidiaries or Branches: Does One Size Fit All?," IMF Staff Discussion Notes 11/04, International Monetary Fund.
- Renato Maino, 2012. "Tackling the “Too Big To Fail” conundrum: Integrating market and regulation," FMG Special Papers sp207, Financial Markets Group.
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- Mario Tonveronachi & Elisabetta Montanaro, 2012. "Financial re-regulation at a crossroads: How the European experience strengthens the case for a radical reform built on Minsky’s approach," PSL Quarterly Review, Economia civile, vol. 65(263), pages 335-383.
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