Arguments for and Against Complex Regulation in Banking
It is a well-known fact that nowadays every single thing in every single area is under control. Indeed, governments want to master everything and put as much limits as they can to avoid crisis. Yet, it cannot be denied that among the sectors “affected” by regulation, the area of banking is one of the most important. In an original speech pronounced in August 2012, Andrew Haldane, the director of the Bank of England denounced a too much complicated regulation in banking. If Haldane admits that the regulation is inevitable, it remains that a complex regulation is sometimes useless. Haldane’s speech entitled “The dog and the frisbee” has been discussed in an article in The Economist of the 8th September 2012.
What are positive and negative aspects of the complex regulation in banking? First, we will consider Haldane’s position and understand it. Afterwards, we will see through various examples (including Glass-Steagall Act, Basel I, Basel II, Basel III and Dodd Frank act) in what extent a complex system regulation in banking is essential in some situations but can also be useless in others. Haldane argues that a too much complicated regulation in banking is ineffective. Thus, he is convinced that the Glass-Steagall Act 1933 that occurred after the 1933 crisis was one of the most efficient regulations of the history. The fact is that this act was in only 37 pages and was simple to read and to understand. Indeed, for him, the less complicated a regulation is, the better the stability of banks will be. Moreover, he asserts that complex regulations cost a lot of money and requires a lot of people “Mr Haldane estimates that Basel 3 may consume the time of 70,000 workers in the European banking industry” says the article. Haldane supposes that any dog can hold a frisbee without being aware of any physic rule. The dog will just follow the frisbee and hold it. The same thing is true for a baseball or a cricket player when they run after a ball or a cricket. If
What are positive and negative aspects of the complex regulation in banking? First, we will consider Haldane’s position and understand it. Afterwards, we will see through various examples (including Glass-Steagall Act, Basel I, Basel II, Basel III and Dodd Frank act) in what extent a complex system regulation in banking is essential in some situations but can also be useless in others. Haldane argues that a too much complicated regulation in banking is ineffective. Thus, he is convinced that the Glass-Steagall Act 1933 that occurred after the 1933 crisis was one of the most efficient regulations of the history. The fact is that this act was in only 37 pages and was simple to read and to understand. Indeed, for him, the less complicated a regulation is, the better the stability of banks will be. Moreover, he asserts that complex regulations cost a lot of money and requires a lot of people “Mr Haldane estimates that Basel 3 may consume the time of 70,000 workers in the European banking industry” says the article. Haldane supposes that any dog can hold a frisbee without being aware of any physic rule. The dog will just follow the frisbee and hold it. The same thing is true for a baseball or a cricket player when they run after a ball or a cricket. If