“… 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 into their crystal balls, a.k.a. their stress tests, to reassure us that the U.S. banking system…
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 in place are unlikely to be adequate if it defaults. Let’s…
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 another aspect of its business model, comparable to its lending or reserving policies, say. Banks’…
My previous post, inquiring as to the actual impact of the Dodd-Frank Act on bank capital, elicited some comments, mainly in the form of tweets, from Dodd-Frank’s defenders. Here are some of the issues raised, along with my response. A tweet from former Schumer staffer and current…
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 to function as a financial health check for the major UK banks,…