Fixing global finance: unfinished business
The 2008 financial crisis was hugely damaging. The focus of reform has been on increasing banks‘ required capital. Together with the other measures taken, this makes a repetition of 2008 less likely. However, the crisis also taught us that financial markets do not work as well as we thought. Fina...
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| Format: | Working Paper |
| Language: | English |
| Published: |
2016
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| Online Access: | https://hdl.handle.net/10356/82408 http://hdl.handle.net/10220/40001 |
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| Institution: | Nanyang Technological University |
| Language: | English |
| Summary: | The 2008 financial crisis was hugely damaging. The focus of reform has been on increasing
banks‘ required capital. Together with the other measures taken, this makes a repetition of
2008 less likely. However, the crisis also taught us that financial markets do not work as well
as we thought. Financial innovation has made the markets more volatile, short-term focused
and more pro-cyclical. Not much has been done to address this issue. This paper suggests
that the government-guaranteed banking sector should be separated much more clearly
from the rest of the financial sector, which should be more explicitly identified as a risky
sector. This separation would change the way the financial sector is managed (with
conservative management returning to the banking sector). Such beneficial changes would
reduce the size of the financial sector, which currently attracts too many of our best brains. |
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