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Safer, but Not Safe Enough

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  • John Vickers

    (All Souls College, University of Oxford, Oxford OX1 4AL, UK)

Abstract

The great divide between official analyses and economists’ views of optimal bank equity capital is not as wide as appears at first sight if the economics of risk is properly addressed. Adapting the BoE’s analysis to take account of abnormal risk conditions, a less benign view of the effectiveness of resolution regimes in systemic crisis, an international rather than domestic perspective, and a consistent approach to risk, takes one a good distance towards the economists’ view. The economic rationale for capital levels in the region of Basel III is left looking thin. It looks thinner still when, as now, price-to-book ratios are calling regulatory capital measures into question for some important banks

Suggested Citation

  • John Vickers, 2019. "Safer, but Not Safe Enough," JRFM, MDPI, vol. 12(3), pages 1-9, September.
    • Handle: RePEc:gam:jjrfmx:v:12:y:2019:i:3:p:152-:d:268493
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    References listed on IDEAS

    as
    1. HyunSong Shin, 2009. "Securitisation and Financial Stability," Economic Journal, Royal Economic Society, vol. 119(536), pages 309-332, March.
    2. John Vickers, 2016. "The Systemic Risk Buffer for UK Banks: A Response to the Bank of England’s Consultation Paper," Journal of Financial Regulation, Oxford University Press, vol. 2(2), pages 264-282.
    3. Robert J. Barro, 2009. "Rare Disasters, Asset Prices, and Welfare Costs," American Economic Review, American Economic Association, vol. 99(1), pages 243-264, March.
    4. Hyun Song Shin, 2009. "Securitisation and Financial Stability," Economic Journal, Royal Economic Society, vol. 119(536), pages 309-332, March.
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    Cited by:

    1. Mikes, Anette & Power, Michael, 2023. "How culture displaced structural reform: problem definition, marketization, and neoliberal myths in bank regulation," LSE Research Online Documents on Economics 120300, London School of Economics and Political Science, LSE Library.
    2. Anette Mikes & Michael Power, 2024. "How Culture Displaced Structural Reform: Problem Definition, Marketization, and Neoliberal Myths in Bank Regulation," Journal of Business Ethics, Springer, vol. 193(2), pages 303-323, August.

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