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.
Blundell-WignallA. (2012), ‘Ratings agencies issues’, presentation to the French Senate, 27 March.
4.
Blundell-WignallA.AtkinsonP.E. (2008), ‘The subprime crisis: causal distortions and regulatory reform’, in BloxhamP.KentC. (eds), Lessons from the Financial Turmoil of 2007 and 2008, Reserve Bank of Australia, July.
5.
Blundell-WignallA.AtkinsonP.E. (2010), ‘Thinking beyond Basel III: necessary solutions for capital and liquidity’, Financial Market Trends, issue 1, OECD.
Blundell-WignallA.AtkinsonP.E. (2012), ‘Deleveraging, traditional versus capital markets banking and the urgent need to separate GSIFI banks’, Financial Market Trends, issue 1, OECD.
8.
Blundell-WignallA.WehingerG.SlovikP. (2009), ‘The elephant in the room: the need to focus on what banks do’, Financial Market Trends, issue 2, OECD.
9.
DuffieD. (2012), ‘Market making under the proposed Volcker rule’, Rock Center for Corporate Governance at Stanford University Working Paper no. 106.
10.
Financial Stability Board (2011), Effective Resolution of Systemically Important Financial Institutions: Recommendations and Timelines, FSB Consultative Document.
11.
Financial Stability Oversight Council (2012), Study and Recommendations on Prohibitions on Proprietary Trading and Certain Relationships with Hedge Funds and Private Equity Funds, January.
12.
General Accounting Office (2009), Troubled Asset Relief Program, Report to Congressional Committees, ‘Status of Government Assistance Provided to AIG’, September.
13.
ISDA (2012), ISDA Margin Survey 2012, International Swaps and Derivatives Association, May.
14.
OECD (2009), The Financial Crisis: Reform and Exit Strategies, Paris, OECD.
15.
OECD (2010), Competition and Credit Rating Agencies, Hearings of the OECD Competition Committee.