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The Business Models of Large Interconnected Banks and the Lessons of the Financial Crisis

Published online by Cambridge University Press:  26 March 2020

Adrian Blundell-Wignall ,
Paul E. Atkinson  and
Caroline Roulet
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Abstract

This paper looks at the urgent and ongoing need to change the business models of global systemically important banks — particularly those that dominate the OTC derivatives markets which carry massive counterparty risk via collateralisation practices. It explores the three main lessons of the financial crisis: too big to fail, excess leverage and conflicts of interest. While regulatory reforms have been plentiful, none have adequately addressed the main source of the problems which lie in the very nature of the business models of large interconnected banks.

Keywords

Financial crisessystemic riskderivativesfinancial reformnon-operating holding company
Type
Research Articles
Information
National Institute Economic Review , Volume 221 , July 2012 , pp. R31 - R43
Copyright
Copyright © 2012 National Institute of Economic and Social Research

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Footnotes

∗

OECD; e-mail: [email protected] and [email protected].

∗∗

Groupe d'Economie Mondiale de Sciences-Po; e-mail: [email protected]. The views in this article are those of the authors and do not purport to represent those of the OECD or its member countries.

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