The new Banking union created by the EU in order to improve regulation of the big European banks is proposing banks to have the minimum level of capital – 8%. When Lehman Brothers went bankrupt, their level of capital was 11%.
Moreover, in case a government of an EU country will want to tighten the regulation and increase the minimum level of capital, they will need to seek permission of this central Banking Union. Imagining the level of lobbying and influence by the financial sector on this Banking Union, it is not hard to figure out whose interests will define this regulator.
I might be too quick to draw conclusions, but i’m afraid, this will be yet another missed opportunity to address the real issues in the sector – size and complexity of financial institutions and their products, quality and riskiness of investments, and more importantly – making banks 100% responsible for their failures. Negotiations on levels of capital clearly demonstrate that the attention has been elegantly shifted from the real causes of financial crisis withing the banks to various external institutions and processes, which therefore predetermines failure of preventing financial crisis in the nearest future.