City AM reports on IEA research

In a new paper “Do we need regulation of bank capital?” the Institute of Economic Affairs’ argues that relatively new moves towards bank capital regulation are counter productive. Banks are best placed to decide what capital levels they require, rather than regulators. A much better change to bank regulation would be to move towards developing systems that allow banks to be wound up when they fail.

The threat of failure that would see banks act more prudently, as currently implicit state backing is responsible for much of the excessive risk taking in the banking sector.

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