Project Management

Learning From Financial Regulation's Mistakes

Date Added: Jun 2009
Format: PDF

There are economic advantages to be had from combining commercial and investment banks, and the prevailing wisdom has been that any risks from doing so can be controlled. The current crisis has presented no evidence that combined (or "Universal") banks are more vulnerable or blameworthy than pure investment or pure commercial ones. But the crucial point is that combining the two kinds of institutions extended the protection given to commercial banks to investment banking, artificially reducing its cost of capital.