How to design a good banking system?

The EU banking system, as we have discussed, is facing a perfect storm. The sector faces unprecedented challenges and is in the midst of large scale changes facing grave uncertainties. At the same time, the European Commission has suddenly turned a rather old idea of a Banking Union into the new buzzword. As our new series on financial regulation comes online and we discuss the Banking Union proposals in the coming days, it is very useful to take a step back and reflect what banking is all about anyway.

It was while thinking this through that we found a forgotten concept paper on 'what a good banking system looks like' that we had first published in late 2009/early 2010. This concept paper highlights all of the most important issues in banking and what needs to be done to make it better serve the real economy and is a very useful read for experts and non-experts alike. We have reproduced it in full below, but it can also be downloaded in a pdf format here.

Re-Define Managing Director Sony Kapoor is interviewed by Euractiv.com

Ex-Lehman banker says EU should crack down on big banks

Instead of addressing fundamental issues like the role of finance, politicians seem stuck in assuaging public anger, argues Sony Kapoor, manager of the international think-tank Re-Define, in an interview with EurActiv.
Kapoor, who has testified on financial regulation at the European Parliament, says world leaders have so far shown a lack of vision in reshaping the post-crisis financial system, arguing that it will be up to the EU's competition authorities to clean up.Outside Brussels, national leaders are missing the bigger picture, says Kapoor, though some have come up with "politically palatable" proposals.

Dear G-20, do the photo-ops but don't forget these principles!

At this Friday’s summit in Pittsburgh, the G-20 leaders will engage in the usual mix of photo ops, gourmet luncheons, backslapping and some real work. They and the world would be better off if this ‘real work’ of reforming the world financial system was informed by some sound principles.

In a debate that has bordered on being shallow and shrill, approaching regulation with a view to increasing the competitiveness, diversity and fairness of the financial system at the same time as reducing its complexity would be the only sensible route to take.