Bank capitalisation and risk

Policymakers have been trying to wrestle with the bank risk for more than a century, most recently with the Basel accords and America’s Dodd-Frank law. But, according to The Bankers’ New Clothes, a powerful new book by Anat Admati and Martin Hellwig, these reform efforts failed to address the basic problem of the crisis: banks are too fragile. The authors persuasively argue that the solution is higher levels of equity capital throughout the banking industry to offset the impact of the implied government protections against failure.

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