The Bankers' New Clothes¶
Admati, A., & Hellwig, M. (2013). The Bankers' New Clothes: What's Wrong with Banking and What to Do about It. Princeton University Press.
Cited by¶
1 citation across 1 artifact.
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Primes¶
- Chesterton's Fence
- In banking regulation, a bank-capital requirement enacted after a prior crisis is a persisting artifact whose cost (reduced lending capacity) is visible while its function (absorbing losses in a downturn) is dormant in good times; rolling it back is cheap and locally beneficial until a shock arrives, at which point the encoded constraint — the buffer that prevents insolvency cascades — turns out to have been load-bearing, and the delayed, catastrophic cost lands.
This sourceArgues bank capital requirements exist to absorb losses and prevent insolvency cascades, so rolling them back removes a load-bearing buffer whose function is dormant in good times and decisive in a shock.
- In banking regulation, a bank-capital requirement enacted after a prior crisis is a persisting artifact whose cost (reduced lending capacity) is visible while its function (absorbing losses in a downturn) is dormant in good times; rolling it back is cheap and locally beneficial until a shock arrives, at which point the encoded constraint — the buffer that prevents insolvency cascades — turns out to have been load-bearing, and the delayed, catastrophic cost lands.
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