Adapting banking supervision for a crisis scenario

Rethinking banking supervision

Dark storm clouds and lightning broken by the sun shining down onto a calm sea

Writing in The English Constitution in 1867, Walter Bagehot wrote that the imperious will, the rapid energy, the eager nature fit for a great crisis are not required – are impediments even – in common times. The reverse may also be true: blind application of normal market principles may be an impediment in a systemic crisis.

Banking supervision practices applied in regular market conditions cannot remain unchanged during a systemic crisis, as negative feedback loops can increase and exceed the

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