Agree A New Framework For Banking Institutions?

By Author: Carlo Rezzonico
Total Articles: 62
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Hardly a day passes without, by any government, politician, research center, supervisors or economist proposed measures are intended to deal with any future financial crisis with the least possible damage. Many of these ideas are not convincing, the few that seem reasonable collide with big difficulties in implementation. For example you plan to force banks to pay amounts in a fund that should serve to support, if necessary, faltering institutions: in this way - they say - the financial world, and not taxpayers, should pay the bill. Inevitably, however, the burden of payment falls on both banks managed seriously (which should not pay anything) about what those run slightly (they should pay for everything). It should also be made this set of considerations: the taxpaying citizens are largely bank customers, they tend to shift the burden of payments to the fund price of their services, in the end pay more without knowing the same people. Not create more justice but simply less transparency. If the proposed funding crisis, or the introduction of some special tax imposed on banks is to be regarded more as a means to satisfy the ...
... grievances of the public, the idea of establishing rules whereby, if a bank encounters serious difficulties to separate the useful parts and save the economy, leaving the rest to fate (where the losing interest, and rightly, shareholders and, in part, creditors) is certainly logical. But it would be difficult to agree all nations economically important. In the absence of international agreement would be very difficult - say - the acceptance by the United States or the European Union a decision of the type mentioned above issued by the Swiss authorities. The foregoing, and many others that could be added, show that the management of a financial crisis poses enormous problems and therefore efforts should focus on prevention. Here the first point to emphasize is the need for a strict monetary policy, which does not encourage them to borrow the light is not forced to make risky investments for groped to earn passable and does not put in the hands of irresponsible people the means to make reckless operation. Unfortunately, central banks, not only have drawn the lesson from the crisis, but they seem to understand everything backwards, persevering in laxity. The second point would be an exemplary punishment of those who caused the damage, the failure to provide casts a negative light on the laws or how they are implemented. Also - we are the third point - you should adopt rules on salaries (but in these institutions bestow certain week assets that the population considers provocative.) Finally, it must grant the banks the right to perform transactions on their own only to the extent that is necessary to make markets work. I do not think the objection that such a restriction would be unenforceable. No doubt you could develop parameters for determining the maximum level of positions needed to keep alive markets. Even if these parameters were determined width, the level permitted for the positions would be far below that which led to bankruptcy some big institution. With such a measure the risk of a major bank to be saved would be reduced to almost nothing and Switzerland could well afford the luxury of large institutions.
It will be observed that the proposed restriction would violate the freedom and market economy principles. Now a bank, according to the concept more widespread, buys and sells securities and currencies on behalf of clients but not on their own because their positions are causing risks irreconcilable with the idea that safety should always be associated with a company credit. Prohibit transactions for own account, except to the extent necessary to make functioning markets, does not contradict the principles of a free economy but simply prevents abuse of the word "bank".
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