Introduction

In 2016, almost a decade after the 2007 banking crisis, banking is still far from being reformed successfully to serve economic growth. Furthermore the regulators are still unsure about how much and what kind of capital can make banks safe. Direct and indirect state subsidies to the private banks continue almost everywhere in core capitalist countries. To top it all in February 2016 Deutsche Bank frightened everyone by bringing back memories of the failed Lehman Brothers when its share price, due to investors’ loss of confidence in a post-crisis creative form of capital called CoCos (contingent convertible capital instruments), collapsed by some 40 per cent in just over a month. Over the same period other European and US bank shares suffered similarly at rates unseen since 2008. In the midst of this nervous stock market turmoil Sir John Vickers, the architect of the UK structural reform in banking, which ring-fenced retail banking from the risky investment banking in banking conglomerates, publicly criticised the regulators at the Bank of England for not following his advice in setting higher capital buffers for banks. Another regulator across the Atlantic, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, who was one of the architects of the US bailout of banks when he was working at the US Treasury at the time, announced that the problem is the size and complexity of banks not the levels of capital calling for radical splitting up of banks into utilities which both the Dodd-Frank Act in the US and the Vickers Report in the UK had ruled out.