How to Avoid Bank Safety’s Death

 

One of Jamie Dimon’s daughters called him up from school with a question more than a decade ago: “Dad, what’s a financial crisis?” 

The billionaire who runs JPMorgan Chase & Co. tried to put her at ease. 

“It’s the type of thing that happens every five to seven years,” he told her, he later testified to the Financial Crisis Inquiry Commission. 

https://englundmacro.blogspot.com/2024/05/dad-whats-financial-crisis.html

Fed stumbled badly in its attempt to update US capital rules and bring them into line with the international Basel standards, which led to a humiliating climbdown by American regulators last year.

My view is that the vast majority of banks’ capital requirements should be set under the main capital rules (the Basel Endgame), more like other countries. 

Regulators should also have discretion to impose extra requirements if individual banks are squeezing much more risk out of their models than peers, or falling down on risk management or governance in ways that endanger their survival. 

Stress testing should be a warning system for extreme or unusual risks – a sense check on what the main capital rules tell us about the safety of banks.  

Paul J. Davies Bloomberg 27 June 2025

https://www.bloomberg.com/opinion/articles/2024-06-26/basel-iii-endgame-rules-for-us-banks-might-be-a-big-fat-nothing

Paul J. Davies is a Bloomberg Opinion columnist covering banking and finance. Previously, he was a reporter for the Wall Street Journal and the Financial Times. 

See also 

https://www.bloomberg.com/opinion/articles/2024-06-26/basel-iii-endgame-rules-for-us-banks-might-be-a-big-fat-nothing

Banking’s New Era of Capital Puts Watchdogs on the Spot

The post-2008 rules are all (mostly) finally settled. Now they have to be enforced and monitored.

Paul J. Davies 17 July 2024

https://www.bloomberg.com/opinion/articles/2024-09-17/banking-s-new-era-of-capital-puts-regulators-on-the-spot