The risks of trading by banks

Authors
Publication date 2015
Host editors
  • J. Danielson
Book title Post-crisis banking regulation: evolution of economic thinking as it happened on Vox
ISBN
  • 9781907142833
Pages (from-to) 35-40
Publisher London: CEPR Press
Organisations
  • Interfacultary Research - Amsterdam Center for Law & Economics (ACLE)
  • Faculty of Economics and Business (FEB) - Amsterdam Business School Research Institute (ABS-RI)
Abstract Liikanen, Vickers, and Volcker all question current banking-trading links. This chapter offers analytic scaffolding for thinking about the separation of banking and trading. Banking generates low risk returns from relationship-based activities; trading generates high-risk returns from short-term concentrated positions. The two are linked since trading allows banks to profit from the ‘spare’ banking capital, but deeper financial markets magnify problems of managing and regulating trading by banks.
Document type Chapter
Note 08 October 2012
Language English
Published at http://www.voxeu.org/sites/default/files/file/Post_Crisis_Banking_Regulation_VoxEU.pdf
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