Friday, 26 October 2012

UK: banking reform and 'too big to fail' - in the right direction but insufficient in degree?

Andy Haldane, the Executive Director for Financial Stability at the Bank of England, delivered a speech yesterday titled On being the right size: see here (pdf). His topic was the 'too big to fail' problem in financial regulation and he argued that it was premature and probably over optimistic to believe that the problem had been solved by recent initiatives. In the course of his speech, Mr Haldane considered past and current reform initiatives, including structural reforms such as the ring-fencing of banking activities. With regard to ring-fencing proposals, he asked a pertinent question: would the required level of cultural separation be achieved within the banking group? He ended is speech by considering other policy options and concluded: "Existing change initiatives are right in direction, but may be insufficient in degree. There may be a distance to travel before banking is the right size."

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