What a capital idea!


This report from the UK think tank Adam Smith Institute looks at how to make Britain’s banks more competitive, innovative, and safer.

UK banks that issue high levels of capital should be freed of other cumbersome prudential regulation, such as the mandatory deposit insurance scheme. Banks are more leveraged now than in the lead-up to the Great Financial Crisis of 2008, when market-value leverage ratios were just over 7% — they now stand at just 4%. The ‘Great Capital Rebuild’ that banks undertook in the past decade is ‘as real as the Wizard of Oz’ says Professor Kevin Dowd. Higher capital requirements and less other prudential regulation would help restore public faith in banking, make banks safer and less prone to causing financial crashes, and reduce the barriers to entry of new banks that would increase competition and customer service. This is similar to the regime in the United States’ CHOICE Act, which was passed by the Republican-controlled House of Representatives in the last Congress.

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