The Transatlantic Banking Crisis: Lessons and EU Reforms
AbstractThe key dynamics of the transatlantic banking crisis are analyzed – with emphasis on the fact that the banking disaster of 2007/08 was not really a surprise –, and the five key requirements for restoring stability and efficiency in the EU/OECD banking sector are highlighted. Most important, however, is the introduction of a new tax regime designed to encourage bankers to take a more long term time horizon in decision-making and to reduce excessive risk-taking. Banks and funds should be taxed not only on the basis of profits but also on the basis of the variability – read variance – of the rate of return on equity: the higher the variability over time the higher the tax to be paid. The quality and comprehensiveness of banks’ balance sheets must be radically improved and all off-balance sheet activities must be included in future total balance sheets. The medium term structure of employment in terms of the breakdown nontradables/tradables will have to adjust.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Policy Papers with number 2.
Length: 59 pages
Date of creation: Apr 2009
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Find related papers by JEL classification:
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- F01 - International Economics - - General - - - Global Outlook
- F30 - International Economics - - International Finance - - - General
- G01 - Financial Economics - - General - - - Financial Crises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-17 (All new papers)
- NEP-BAN-2010-04-17 (Banking)
- NEP-EEC-2010-04-17 (European Economics)
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