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British Bank Proposal Expected to Include Stiff Rules
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Banking regulation in the U.S. after the Dodd-Frank legislation differs from banking regulation rules proposed by the Independent Commission on Banking in Britain. Britain has a much bigger financial sector relative to the size of its economy than the U.S., posing larger systemic risks. The commission in Britain is proposing structural changes that would separate investment banking from deposit taking at banks. Banks would have separate balance sheets for these two activities- and operate them as separate subsidiaries- even though they are part of one holding company. This means it would be harder to raise money cheaply for risktaking in investment banking. Under the Volcker Rule in the U.S., banks investment banking and deposit taking would not be separated in a structural separation- there would still be one balance sheet- only banks ability to trade with their own capital and run hedge funds would be constrained. Some banks have spun off trading operations in the U.S. and the the rules banks have to follow have not been clearly defined. Too big to fail is still a problem under current American regulation, though its effects are mitigated to some extent. As one expert puts it, its hard to regulate the banks because too much money is involved and the banks have the money and the lawyers to prevent or dilute new rules. The argument made by the banks in Britain is that universal international banking provides a public benefit and efficiencies. But John Vickers, the former chief economist of the Bank of England, and chairman of the Independent Commission on Banking, has a different view. He said recently, "it seems quite hard to identify and quantify real efficiencies as distinct from purely private gains."
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Ring fencing of risky operations and addressing other issues in British banking, including "too big to fail."
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Weâre All Still Hostages to the Big Banks
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Volcker in the USA and Mervyn King in England both agree that speculative and utility banking should be separated, and too big to fail banks broken up. Regulation to prevent a future banking crisis they agree is something of an illusion.
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A drafting of the Volcker Rule to ensure compliance to the ideas that motivated former Fed chairman Volcker to suggest the rule.
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Both Liberals and Conservatives in the U.K. agree on a levy on the banks to raise 1 billion pounds. Liberal's Cable is the new Business Secretary and he favors shrinking the large banks and reducing systemic risk, and a separation of retail and investment banking activities. The Financial Services Authority will continue to operate and examine banks, the Bank of England will oversee systemic risk and regulation of banks.
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British Bank Proposal Expected to Include Stiff Rules
New York Times 04/07/2011
Lighter banking regulation in the U.S. compared to the stricter regulation proposed in Britain- 2011-2012
04/07/2011
The structural separation of investment banking and trading activities of banks from deposit taking activity, that is proposed by the Independent Commission on Banking in Britain. This is different from the Volcker Rule in the U.S., which sets rules banks are required to follow to constrain risktaking activity by the trading arm of banks. In practice only a lighter form of the Volcker Rule has been adopted in the U.S., and the rules are not clearly defined. Ring fencing of risk taking activities at banks is an important part of British regulation, an approach also adopted by Germany.
Grouped Articles
The Power Behind the Throne at the Federal Reserve
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Volcker Rule to Curb Bank Trading Proves Hard to Write
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British Bank Proposal Expected to Include Stiff Rules
New York Times 04/07/2011
British Bank Panel Suggests Changes to Limit Risk
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Big Banks in U.K. Dodge Breakup
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After the reforms: Safer, but not yet safe enough
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Paul Volcker's fading influence on the Obama administration.
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Former Fed chairman Paul Volcker added to the credibility of the incoming Obama administration during the early days. Now his advice about the need to reinstate a wall between banking for taking federally insured deposits and making loans, from investment banking's trading in securtities, is beig ignored. He does not think regulation will be effective. One reason our system does not work thay way. Influential bankers can water down financial regulation in Congress.
Grouped Articles
Volcker Assumes Smaller-Than-Expected Role With Obama
Wall Street Journal 04/11/2009
Volcker Fails to Sell a Bank Strategy
New York Times 10/21/2009
Fed Chooses Staff Economist as Head of Bank Supervision
Wall Street Journal 10/21/2009
BOE's King: Big Banks Should Get Broken Up
Wall Street Journal 10/21/2009
Britain and Its Central Bank Disagree on Banking Laws
New York Times 10/22/2009
Fed's Tarullo Shakes Up Bank Rules
Wall Street Journal 10/26/2009
Volcker's advice on the writing of regulatory reform
07/09/2010
He advises writing broad rules that are harder for banks to circumvent.
Grouped Articles
Volcker Plans to Restore Faith in Government
New York Times 05/29/2013
Volcker Rule to Curb Bank Trading Proves Hard to Write
Wall Street Journal 09/10/2013
Paul Volcker Pushes for Reform, and Regrets His Past Silence
New York Times 07/09/2010
The Volcker Rule on Bank Risks Approaches Its Final Edits
New York Times 12/03/2013
Regulators Set to Approve Toughened 'Volcker Rule'
Wall Street Journal 12/04/2013
New York Times 12/14/2013
Ring fencing of risky operations at British banks
04/07/2011
Grouped Articles
Osborne Promises More Regulatory Powers to Split Up British Banks
New York Times 02/04/2013
British Bank Proposal Expected to Include Stiff Rules
New York Times 04/07/2011
The Volcker Rule and the actions taken by the Independent Commission on Banking in Britain
04/07/2011
Britain has a much larger financial sector as aproportion of its economy than the U.S. For this reason the U.K.'s Independent Commission on banking takes a serious view of systemic risks- separating investment banking from deposit taking.
Linked Articles
Volcker to Push Back on Banks' Trading
Wall Street Journal 02/13/2012
British Bank Proposal Expected to Include Stiff Rules
New York Times 04/07/2011
Comparing approaches of Britain and U.S. to ring-fencing investment banking activities of banks from retail banking operations
04/07/2011
Linked Articles
British Bank Proposal Expected to Include Stiff Rules
New York Times 04/07/2011
British Commission Says Bank Reforms Don't Go Far Enough
New York Times 12/21/2012
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