Should a Bank in Difficulties Receive Assistance?
This was the question put to me by [UK] Treasury Committee Chairman Andrew Tyrie MP when I appeared before the Committee on January 6th to give evidence on the Bank of England’s latest Financial...
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Hayek-Style Cybercurrency
In his ground-breaking work, Denationalisation of Money: the Argument Refined, F.A. Hayek proposed that open competition among private suppliers of irredeemable monies would favor the survival of...
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How Not to Stress Test: UK Edition
Anyone who follows the stress tests conducted by the Fed and various European banking authorities can’t help poking fun at them. After all, it’s hard to repress a chuckle when, time and again, a bank...
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The Bank of England Fails Its Stress Test, Again
On December 1, 2015, the Bank of England released the results of its second round of annual stress tests, which aim to measure the capital adequacy of the UK banking system. This exercise is intended...
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Do Market Failures Justify Bank Capital Adequacy Regulation
One of the most important elements of contemporary financial regulation is bank capital adequacy regulation — the regulation of banks’ minimum capital requirements. Capital adequacy regulation has...
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Two Cheers for the Leverage Ratio
In a previous blog posting, I suggested that there is no case for capital adequacy regulation in an unregulated banking system. In this ‘first-best’ environment, a bank’s capital policy would be just...
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Is Deutsche Bank Kaputt?
It looks like Deutsche Bank is heading toward failure. Why might we be concerned? The problem is that Deutsche is too big to fail — more precisely, that the new Basel III bank resolution procedures now...
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Bank of Dave
Tom Clougherty’s recent Alt-M post on competition (or the lack thereof) in UK banking nicely highlights the problem posed by barriers to entry into the British banking industry. That there is indeed an...
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Have Central Bankers "Lost the Plot?"
Recently, the UK Daily Telegraph ran a remarkable Op-Ed written by William Hague, the just-retired Conservative politician and former UK Foreign Secretary. The title alone was startling: “Central...
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The 2017 Stress Tests: Are US Banks Really in Good Shape?
“… equally efficacious, and equally a hoax.” – Benjamin Disraeli, 1848[1] One of the highlights of the U.S. summer for Fed watchers is the annual ritual in which the Fed’s economic soothsayers peer...
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