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Q: How should the Too Big To Fail problem be
The too big to fail problem has been front and centre of the
debate over the last four or five years during the course of
the crisis, and encouragingly quite a lot has already been done
and agreed to try and get our arms around that problem.
So we're requiring the biggest banks in the world to hold
more capital. We're putting in place regimes for resolving
them, winding them down in hopefully a more orderly way. And
we're also embarked globally on measures to reform their
underlying structures - the Volcker proposals in the US, the
Vickers proposals here in the UK. Indeed on the continent of
Europe, the Liikanen proposals which were also all about
altering the structure of banking.
So all that's happening, it's all good stuff, it's all
necessary. But the debate really is whether it is sufficient
and I think the emerging view there both among market
participants and officials like myself, is that there is still
unfinished business remains to some extent still unsolved.
If so, which way next? Well personally I'm open-minded about
what form extra measures might take if they do need to be
taken. We could ask the biggest banks to hold an extra slug of
capital in addition to what has already been agreed. The debate
in the US is floating around that sort of issue right now.
We could, and others have floated this too, impose explicit
limits on the size of the biggest banks. That sounds quite a
draconian thing, but I think if we found ourselves in a
position where other measures hadn't proved adequate, it should
remain on the table.
So break-up isn't the only option, there are plenty more
options that can and should be tried, we should recognise that
as things stand today, more might well need to be done to
tackle the problems. The biggest problem, if you like, the
crisis has thrown up.
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Part 2: Bank of England’s Andrew Haldane defends
Part 3: Bank of England’s Andrew Haldane outlines
how best to regulate shadow banks
Part 4: Bank of England’s Andrew Haldane on the
risk of 'zero interest rates’