The financial crisis triggered a revolution in banking regulation, but it is too soon to tell if banks have been truly tamed
They might not have been responsible for selling the dubiously repackaged sub-prime mortgages that were at the root of the 2007-8 financial crisis, but all the same, regulators rightly took a lot of the blame. The United States Financial Crisis Inquiry Commission (FCIC), which produced a comprehensive report on the causes of the crisis, said that while there was a “systemic breakdown in accountability and ethics” among lenders, it was regulators that let them get away with it. “The sentries were not at their posts,” the FCIC said.
No surprise, then, that the past five years have brought a wave of new financial regulation, aimed in particular at banks, which is designed to ensure that the financial system cannot implode again.
In the US, the monolithic Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law in 2010. It is intended as a catch-all: 848 pages covering financial-system oversight, bank capital requirements, executive pay, investor protection and many other issues, plus a range of miscellaneous regulations thrown in – including disclosure rules for conflict minerals and provisions on the safety of coal mines.
The EU, meanwhile, has taken a piecemeal approach. More than 50 post-crisis laws on the financial system...