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Thursday, November 19, 2009

The problems of big banks

I wrote an article in Financial Express titled The problem of big banks. On this subject, also see:
  1. In the world of banks, bigger can be better, Charles Calomiris in the Wall Street Journal.
  2. A three-way split is the most logical, by John Gapper in the Financial Times.
  3. Narrow banking is not the answer to systemic fragility by Charles Goodhart.
  4. See the section titled Regulatory and legislative reaction and the foreign exchange market in Lessons for the foreign exchange market from the global financial crisis by Michael Melvin and Mark P. Taylor on voxEU.


  1. This contingent capital thing is hogwash. It requires some detailed analysis. I have a feeling that when a bank is 'nearing' trouble and the equity gets converted into debt, that will be a strong signal of impending trouble to regular equity investors leading to market values crashing!

  2. One can understand the inertia in Public Sector Banks' consolidation, but despite the obvious benefits of scale, what prevents the M & As among old Indian private sector banks which number at least 15?

  3. Growth, inflation, and currency pegs are competing forces which cannot all be controlled. However, managing all three can mitigate the volatility in any one.


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