Andy Haldane:: Have we solved ‘too big to fail’?
Monday, 21 January, 2013 Leave a comment
If you still care about the role of Central Banks (you should, although it may not change much!) a guy like Andy Haldane is ALWAYS worth listening to. Here is his latest contribution…
As with systemic surcharges, the issue here is not to so much the bail-in principle, but its application in practice. Bail-in, whether of big banks, sovereigns or companies, faces an acute time-consistency problem. Policymakers face a trade-off between placing losses on a narrow set of tax-payers today (bail-in) or spreading that risk across a wider set of tax-payers today and tomorrow (bail-out).
A risk-averse, tax-smoothing government may tend towards the latter path – and historically has almost always done so, most notably in response to the present financial crisis. Next time may of course be different…
AH appeared in front of the Parliamentary Commission on Banking Standards (video) in November 2012. At the time I was prompted to explain my views on the subject of "ring-fencing"…
KNIGHT or NINJA?
Reducing "flexibility" through partitioning or "ring-fencing", when AGILITY is a prerequisite for every business in the Digital Age, could only make sense to career regulators, lawyers and politicians intent upon ignoring the “law of Requisite Variety”. The era of the Medieval Knight is long past and a "suit of armour" may mask but won’t change culture!!!
Of course Ontonix do have a view on a better alternative and that is to measure, monitor and manage RESILIENCE!
- Ending ‘Too Big to Fail’: A Proposal for Reform (ritholtz.com)
- Why not "constructive transparency"? (fitforrandomness.wordpress.com)
- Mervyn King warns bankers will aim to undermine ring-fence (standard.co.uk)
- Use yer heid:: conventional wisdom requires a sound basis (fitforrandomness.wordpress.com)
- Taxpayers have ‘got a terrible deal’ out of the bank bail-outs (telegraph.co.uk)
- Ontonix:: how to correct ratings (or how to stop the manipulation) (fitforrandomness.wordpress.com)