Managing the Crisis, Exit and Requirements of Reform
The authors set out how all crises should be managed according to four key steps and contrast this with what authorities actually did in different jurisdictions following 2008 (showing the USA to be closer to the mark than Europe). They raise two questions that have occupied policy makers since then: how to exit from emergency measures and what reforms are needed. The authors present and analyse the different proposals including inter alia: dealing with too big to fail; improving corporate governance; ensuring capital adequacy; and separating investment and deposit banking. Based on observed facts about the crisis, they present a number or a priori ideas about capital regulation and bank business models, setting the scene for a fuller discussion based on empirical evidence in subsequent chapters.
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