Large systemic banks and fractional reserve banking, intractable dilemmas in search of effective solutions

Research output: Chapter in Book/Report/Conference proceedingChapter (peer-reviewed)peer-review

Abstract

Banks have been a ubiquitous feature of economic life since at least the 18th century. Yet the transformation that banks have undergone in the past thirty years has made the struggle of making them safe ever harder and more challenging. Arguably, the notion of market discipline aiding financial stability in the financial sector is sometimes stretched to a breaking point for three reasons: inherently flawed corporate governance incentives, the (albeit now fading) possibility of a bailout, and complexity. This chapter intends to provide a balanced, all encompassing,and in depth discussion of the social utility of big banks in a fractional reserve banking system in the post-2008 context utilizing a very wide array of empirical and theoretical works. It will, thus, discuss the dilemmas surrounding the desired demolition of the Too-big-to-fail bank (TBTF) in the post-reform era. To this effect, the chapter will explain that,while well calibrated structural reforms and special resolution regimes will certainly help to alleviate the TBTF problem in the banking sector,they will not eliminate it.
Original languageEnglish
Title of host publicationReconceptualizing Global Finance and its Regulation
EditorsDouglas Arner, Emilios Avgouleas, Ross Buckley
Place of PublicationNew York, Hong Kong, Sydney
PublisherCambridge University Press
Pages659-692
ISBN (Print)9781107100930
Publication statusPublished - 2016

Fingerprint

Dive into the research topics of 'Large systemic banks and fractional reserve banking, intractable dilemmas in search of effective solutions'. Together they form a unique fingerprint.

Cite this