Rethinking banks and banking regulation in the age of financial instability

Abstract

The banking crises that exploded in the spring of 2023 revealed the lingering fragility of the financial system. The collapse of Silicon Valley Bank and Credit Suisse in particular represented somewhat of a spectacular turning point that exposed the instability of a number of financial institutions of different size and shape, and across jurisdictions. This essay contributes to the ongoing discussions on banking regulation by taking stock of these events and offering a fundamental reassessment of the structure of banking. It observes that this period of instability is a seamless continuation of the global financial crisis of 2008, which morphed into a number of ‘minor crises’, such as the panic of 2020 and the present banking crises. Ultimately, this essay calls for structural adjustments in banking, the likes of which were not sufficiently engineered in the aftermath of 2008.