Help the aged

Author: | Published: 25 Mar 2010

There are any number of prescriptions for the problem of institutions that are too big to fail. Some aim to make them smaller by prescribing legal limitations on their activities. This measure has its supporters in the US. Another is to reduce the size of institutions through increased capital requirements for select business lines or the taxation of lines or products. This has its proponents in Britain. Other measures aim at making the institutions less likely to fail, by increasing liquidity and the quality and quantity of capital. This is the measure seemingly favoured by the Basel Committee in its consultative documents.

In Australia, the Australian Prudential Regulation Authority has published proposals on liquidity. It is yet to publish detailed proposals on capital but has advised institutions to be mindful of the Basel Committee proposals.

Measures of the kind favoured by the Basel Committee are perhaps the most likely to...