On the third anniversary of the passage of the Dodd-Frank Act, banking reform remains a work in progress across the world. In the US key provisions of the law, including the Volcker rule to limit proprietary trading, have still to be implemented and the authorities only recently published new rules on capital standards. In the EU, last month’s agreement by finance ministers on rules to govern what happens in the case of bank failures was an important step but many questions remain. And on both sides of the Atlantic, much more needs to be done on a fundamental issue – the structure of banking entities.
This is crucial for three reasons.
First, having a clear sense of who is in charge of what is vital when it comes to management and supervision, especially in times of stress. Structural reform and “living wills” can be used to help clarify lines of authority, align business risk with organisational form and simplify structures of complex financial institutions.