by Uddin Ifeanyi, for Next, March 22, 2010.
The global financial crisis, which set in around mid-2008, is arguably past its worst. We may debate the eventual outlines of the recovery, whether the trajectory will be v-shaped or u-shaped, but the shadow of the new regulatory environment is evident from this vantage.
Depository institutions should expect to hold much more capital against the loans they make going forward, than was the case before the crisis. Central banks just might adopt variations of the Volcker rule. The former chair of the US Federal Reserve and current Chairman of President Obama’s Economic Recovery Advisory Board, Paul Volcker has argued for restricting banks from trading in their own names in the investment and brokerage markets.
When Giovanni Vico (the recurring cycle of three ages) averred that history goes round in cycles he could not have had the Glass-Steagall Act in mind. For, although the Volcker rule lacks the reach of the 1933 law, which legislated a division between investment and commercial banking in the United States of America, it does do much to recover its spirit.
One other reform that it is fair to hope for is the requirement that the markets play a bigger role in the governance of Bayero University, Kanobanks. For all its worth, this one bit of the new financial institutions architecture pre-dates the current crisis-driven effort at the system’s makeover. It showed up as a pillar in the Basle II system. And was much talked about in the wake of the Enron-related corporate governance crisis, when most commentators felt that institutional investors could have done more to hold the feet of the managers of the companies in which they had investments to the fire…(continue reading)
Corporate Governance Leaders 