The elephant in the room: The need to deal with what banks do:
Contagion risk and counterparty failure have been the main hallmarks of the current crisis. While some large diversified banks that focused mainly on commercial banking survived very well, others suffered crippling losses. Sound corporate governance and strong riskmanagement culture should enable ba...
Gespeichert in:
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| Weitere Verfasser: | , |
| Format: | Elektronisch Artikel |
| Sprache: | English |
| Veröffentlicht: |
Paris
OECD Publishing
2010
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| Schlagworte: | |
| Online-Zugang: | Volltext |
| Zusammenfassung: | Contagion risk and counterparty failure have been the main hallmarks of the current crisis. While some large diversified banks that focused mainly on commercial banking survived very well, others suffered crippling losses. Sound corporate governance and strong riskmanagement culture should enable banks to avoid excessive leverage and risk taking. The question is whether there is a better way, via leverage rules or rules on the structures of large conglomerates, to ensure volatile investment banking functions do not dominate the future stability of the commercial banking and financial intermediation environment that is so critical for economic activity. While there is a main consensus on the need for reform of capital rules, dynamic provisioning, better co-operation for future crises, centralised trading of derivatives etc., the question is whether such reforms will be sufficient if they do not address contagion and counterparty risk directly. The world outside of policy making is waiting for a fundamental reassessment of banks' business models: what banks are supposed to do and how they compete with each other. It is the "elephant in the room" on which some policy makers have not yet had the time or inclination to focus. This article emphasises not only the need for transparent and comparable accounting rules and for improvements in corporate governance, but also supports the imposition of a group leverage ratio to provide a binding capital constraint (that Basel riskweighted rules have been unable to achieve) and proposes a Non- Operating Holding Company Structure (NOHC) - reforms that are essential to deal with contagion and counterparty risk that are so integral to the 'too big to fail' issue. |
| Beschreibung: | 1 Online-Ressource (27 p.) |
| DOI: | 10.1787/fmt-v2009-art11-en |
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| 520 | |a Contagion risk and counterparty failure have been the main hallmarks of the current crisis. While some large diversified banks that focused mainly on commercial banking survived very well, others suffered crippling losses. Sound corporate governance and strong riskmanagement culture should enable banks to avoid excessive leverage and risk taking. The question is whether there is a better way, via leverage rules or rules on the structures of large conglomerates, to ensure volatile investment banking functions do not dominate the future stability of the commercial banking and financial intermediation environment that is so critical for economic activity. While there is a main consensus on the need for reform of capital rules, dynamic provisioning, better co-operation for future crises, centralised trading of derivatives etc., the question is whether such reforms will be sufficient if they do not address contagion and counterparty risk directly. The world outside of policy making is waiting for a fundamental reassessment of banks' business models: what banks are supposed to do and how they compete with each other. It is the "elephant in the room" on which some policy makers have not yet had the time or inclination to focus. This article emphasises not only the need for transparent and comparable accounting rules and for improvements in corporate governance, but also supports the imposition of a group leverage ratio to provide a binding capital constraint (that Basel riskweighted rules have been unable to achieve) and proposes a Non- Operating Holding Company Structure (NOHC) - reforms that are essential to deal with contagion and counterparty risk that are so integral to the 'too big to fail' issue. | ||
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| spelling | Blundell-Wignall, Adrian VerfasserIn aut The elephant in the room: The need to deal with what banks do Adrian, Blundell-Wignall, Gert, Wehinger and Patrick, Slovik Paris OECD Publishing 2010 1 Online-Ressource (27 p.) Text txt rdacontent Computermedien c rdamedia Online-Ressource cr rdacarrier Contagion risk and counterparty failure have been the main hallmarks of the current crisis. While some large diversified banks that focused mainly on commercial banking survived very well, others suffered crippling losses. Sound corporate governance and strong riskmanagement culture should enable banks to avoid excessive leverage and risk taking. The question is whether there is a better way, via leverage rules or rules on the structures of large conglomerates, to ensure volatile investment banking functions do not dominate the future stability of the commercial banking and financial intermediation environment that is so critical for economic activity. While there is a main consensus on the need for reform of capital rules, dynamic provisioning, better co-operation for future crises, centralised trading of derivatives etc., the question is whether such reforms will be sufficient if they do not address contagion and counterparty risk directly. The world outside of policy making is waiting for a fundamental reassessment of banks' business models: what banks are supposed to do and how they compete with each other. It is the "elephant in the room" on which some policy makers have not yet had the time or inclination to focus. This article emphasises not only the need for transparent and comparable accounting rules and for improvements in corporate governance, but also supports the imposition of a group leverage ratio to provide a binding capital constraint (that Basel riskweighted rules have been unable to achieve) and proposes a Non- Operating Holding Company Structure (NOHC) - reforms that are essential to deal with contagion and counterparty risk that are so integral to the 'too big to fail' issue. Finance and Investment Wehinger, Gert MitwirkendeR ctb Slovik, Patrick MitwirkendeR ctb Enthalten in OECD Journal: Financial Market Trends Vol. 2009, no. 2, p. 1-27 volume:2009 year:2009 number:2 pages:1-27 FWS01 ZDB-13-SOC FWS_PDA_SOC https://doi.org/10.1787/fmt-v2009-art11-en Volltext |
| spellingShingle | Blundell-Wignall, Adrian The elephant in the room: The need to deal with what banks do Finance and Investment |
| title | The elephant in the room: The need to deal with what banks do |
| title_auth | The elephant in the room: The need to deal with what banks do |
| title_exact_search | The elephant in the room: The need to deal with what banks do |
| title_full | The elephant in the room: The need to deal with what banks do Adrian, Blundell-Wignall, Gert, Wehinger and Patrick, Slovik |
| title_fullStr | The elephant in the room: The need to deal with what banks do Adrian, Blundell-Wignall, Gert, Wehinger and Patrick, Slovik |
| title_full_unstemmed | The elephant in the room: The need to deal with what banks do Adrian, Blundell-Wignall, Gert, Wehinger and Patrick, Slovik |
| title_short | The elephant in the room: The need to deal with what banks do |
| title_sort | elephant in the room the need to deal with what banks do |
| topic | Finance and Investment |
| topic_facet | Finance and Investment |
| url | https://doi.org/10.1787/fmt-v2009-art11-en |
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