THE new masters of the financial universe are neither bank bosses nor hedge-fund titans. They are the regulators whose job it is to make finance safer. Daniel Tarullo, Andrew Bailey and Danièle Nouy, senior regulators in America, Britain and the euro zone respectively, may not have the salaries, egos or profiles of Wall Street superstars, but the decisions they and people like them make are shaping the industry. As John Mack, a former boss of Morgan Stanley, reportedly told his successor: “The government is your number-one client.” Even for those who deeply mistrust finance, that ought to give pause.
The global financial crisis made new rules inevitable and necessary. Taxpayers need protection from the risks of failure: hence a series of measures to ensure that banks finance themselves with more equity, have lots of liquid assets and will “bail in” creditors if they collapse. The disaster of 2008 persuaded officials not just to write harsher rules, but also to be more flexible. Risks can materialise in unexpected places—dull old money-market funds, for instance, proved a shocking source of vulnerability. The industry can game static,...
from The Economist: Leaders http://ift.tt/1gMGHaD
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