Minsky at Basel: A Global Cap to Build an Effective Postcrisis Banking Supervision Framework

Giuseppe Mastromatteo and Giuseppe Mastromatteo
Authors registered in the RePEc Author Service: Lorenzo Esposito and Giuseppe Mastromatteo

Economics Working Paper Archive from Levy Economics Institute

Abstract: The global financial crisis shattered the conventional wisdom about how financial markets work and how to regulate them. Authorities intervened to stop the panic -- short-term pragmatism that spoke volumes about the robustness of mainstream economics. However, their very success in taming the collapse reduced efforts to radically change the "big bank" business model and lessened the possibility of serious banking reform -- meaning that a strong and possibly even bigger financial crisis is inevitable in the future. We think an overall alternative is needed and at hand: Minsky's theories on investment, financial stability, the growing weight of the financial sector, and the role of the state. Building on this legacy, it is possible to analyze which aspects of the post-2008 reforms actually work. In this respect, we argue that the only effective solution is to impose a global cap on the absolute size of banks.

Keywords: Banking Regulation; Financial Stability; Minsky; Basel 3 (search for similar items in EconPapers)
JEL-codes: E12 G01 G28 (search for similar items in EconPapers)
Date: 2016-09
New Economics Papers: this item is included in nep-fmk, nep-hme, nep-pke and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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