Summary of Reconsidering Bank Capital Regulation

A New Combination of Rules, Regulators, and Market Discipline

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Reconsidering Bank Capital Regulation summary
This blueprint for improving bank capital regulation could prove to be the vaccine against bank failures.

Rating

8 Overall

8 Importance

8 Innovation

7 Style

Recommendation

The 2008 financial crisis and other instances of bank failures testify to the fact that the supervision of banks’ capital requirements has hazardous shortcomings. Duke economics professor Connel Fullenkamp and IMF economist Céline Rochon make a robust case for simpler rules, empowered regulators and greater market discipline that would eliminate a one-size-fits-all approach. However, their arguments place great faith in the same regulators who have been found lacking time and again. Although this IMF report doesn’t refer to regulators’ most important function – ensuring that banks use their capital appropriately to fuel economies – getAbstract recommends this analysis as a necessary read for bankers, policy makers and those responsible for keeping the global banking system stable.

In this summary, you will learn

  • Why bank capital standards remain inadequate, despite recent regulatory changes
  • How simpler rules, empowered regulators and greater market discipline would improve financial regulation
  • How an individualized approach to capital requirements would address the too-big-to-fail issue
 

Summary

The Response to the Crisis
The financial crisis that spread rapidly across the globe in 2008 highlighted a number of inadequacies in the way national supervisors regulate banks. Despite previous warnings, regulation did little to rein in too-big-to-fail organizations. While the Basel accords...
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About the Authors

Connel Fullenkamp is a professor of economics at Duke University. Céline Rochon is a senior economist at the IMF Institute.


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