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First let me express my thanks, and some surprise, to the organizers for the invitation to make some pre-dinner remarks on the progress of banking reform since the crisis. 1 Surprise because I doubt I’m the appetizer that some of you might have hoped for. Enter the terms you wish to search for. What’s the use mark warden bitcoin chart economics?

The general opinion expressed by those in the financial sector and its regulators is that reform since 2008 has got us to about the right place in terms of limits on bank leverage. But the majority view of economists outside the financial sector is that Basel III goes nowhere near far enough. This column argues that while it represents a huge improvement on Basel II, Basel III should be seen as a staging post, not an end-point, and built upon in the years ahead. Surprise because I doubt I’m the appetizer that some of you might have hoped for. After all, the interbank markets started to seize up in August 2007. But of the mid-September anniversaries, Northern Rock in 2007 seemed a bit too British for such an international gathering as this.

So Lehman Brothers in 2008, and the global mayhem that followed, is my reference point. But few picked up on it, or even on the collapse of Bear Stearns the following March. Thus came the near-collapse of market capitalism in the autumn nine years ago. Risk weights are for another day. There won’t be time to talk about liquidity, and anyway the serious liquidity problems tend to be manifestations of underlying solvency problems.

Neither will I talk about the structural reform, though that is what the UK’s Independent Commission on Banking is best known for, except to make two observations. The first is that ring-fencing is being implemented in the UK, and on time. Credit to the Prudential Regulation Authority for its firmness of purpose on that front. The second is that, besides the Volcker rule, there is remarkably little serious structural reform anywhere else. Glass-Steagall law for the 21st century in the US, seem to be going nowhere.

The EU version of the Volcker rule is so narrowly defined as to make it almost a sideshow, a distraction from the deeper reform proposed by the Liikanen group. In short, we have structural reform in the UK and business as usual everywhere else, despite what happened nine years ago. The leverage question is one of the most fundamental issues for a market economy. On its answer there is a great divide. 2008 has got us to about the right place. Banks generally can have leverage of 30 or so, and the largest institutions 25 or so. The US limits leverage more than the global norm, but there are accounting differences.

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