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Too Big To Fail Isn't Too Clever To Regulate

The New Indian Express Hubballi

|

August 20, 2025

With debt driving the economy, banks have become powerful. They often use their influence to chip away at the curbs imposed. Regulators need to be better equipped to make them toe the line

- SATYAJIT DAS

Stricter banking regulations known as Basel 3, introduced after the 2008 financial crisis to strengthen the global financial system, are now being systematically weakened. Understanding how regulatory 'sausage' is made gives insights into the problems.

Banks facilitate payments, accept deposits and provide credit and risk management tools. Deregulation and the drive for size and profitability have led banks to expand into underwriting securities, insurance, asset management and trading.

The risk of banking is simple. Unlike funds, banks guarantee the return of deposits. Losses from loans or other activities can jeopardize their ability to meet obligations. High leverage (10-12 times) exacerbates this risk. Banking involves maturity transformation. Deposits have shorter maturities than assets, meaning simultaneous large withdrawals create liquidity risk. Mismatches of maturities can expose the bank to rate fluctuations.

These risks can be addressed by less leverage with banks holding more capital, maintaining liquidity reserves and reducing maturity mismatches. Riskier activities, especially trading, can be restricted or supported by high levels of shareholder funds. Basel 3's attempts to do this were unnecessarily complicated.

Equity, which encompasses many types of securities, is supplemented by a separate leverage ratio. Capital calculations often require arbitrary and subjective differentiation between risks. Banks must meet a liquidity ratio and net stable funding ratio. For off balance sheet instruments, like derivatives whose risks are difficult to estimate, there is a bewildering mix of central clearing, collateral and counterparty risk charges. Trading exposure is measured by complex formulas. Proprietary trading is theoretically restricted. Banks must prepare 'living wills', a funeral plan for unwinding transactions in the event of failure.

The New Indian Express Hubballi'den DAHA FAZLA HİKAYE

The New Indian Express Hubballi

Two dons-turned-politicians draw battle lines on Mokama poll turf

BATTLE lines have been drawn in Bihar’s Mokama assembly constituency ahead of the first-phase polls on November 6, as two don-turned-politicians, Anant Singh and Surajbhan Singh, prepare for a high-octane electoral clash.

time to read

2 mins

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The New Indian Express Hubballi

PK SAYS BJP FORCING HIS CANDIDATES TO OPT OUT OF CONTEST

JAN Suraaj Party (JSP) founder Prashant Kishor on Tuesday launched a scathing attack on BJP alleging that three of his party candidates for the upcoming Bihar Assembly elections withdrew their nominations under “pressure” from the ruling party.

time to read

1 min

October 22, 2025

The New Indian Express Hubballi

EC: Print ads a day before or poll date need pre-certification

AHEAD of assembly polls in Bihar, the Election Commission of India (ECI) on Tuesday issued an order saying to ensure a fair campaign environment, no party, candidate, organisation or person shall publish any advertisement in print media on poll day and one day prior to the poll day, unless the contents are pre-certified by the Media Certification and Monitoring Committee.

time to read

1 min

October 22, 2025

The New Indian Express Hubballi

Winter blackouts loom as Russia targets Kyiv’s grids

AS the lights went out in her hometown, 40-year-old Zinaida Kot could not help but think about her next dialysis treatment for kidney disease. Without electricity, the machine that keeps her alive stops working.

time to read

1 min

October 22, 2025

The New Indian Express Hubballi

WASTE LAND: A NATION OF LANDFILLS

SOME years ago, I was editing a newspaper in Mumbai and we ran a report on the city’s eternal garbage problem.

time to read

3 mins

October 22, 2025

The New Indian Express Hubballi

Paraglider from Canada found dead, Australian rescued in HP

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time to read

1 min

October 22, 2025

The New Indian Express Hubballi

B'luru to get ₹1.20Lcr boost for infra works

CAN money work the magic? The bumbling and crumbling Bengaluru is set to get a huge cash infusion, nearly Rs 1.20 lakh crore, from the state government for various development projects in the city.

time to read

1 min

October 22, 2025

The New Indian Express Hubballi

10 months on, NMC yet to act against 30 docs for 'sponsored' foreign trips

THE National Medical Commission (NMC) is yet to take any action against 30 doctors who accepted free trips to Monaco and Paris worth ₹1.91 crore last year, despite the Department of Pharmaceuticals (DoP) recommendations that action should be taken against them for violating professional misconduct.

time to read

1 mins

October 22, 2025

The New Indian Express Hubballi

The New Indian Express Hubballi

Speaker appoints lawyer to assist panel probing Justice Varma graft case

LOK Sabha Speaker Om Birla has appointed advocate Karan Umesh Salvi as a consultant to assist the judges’ inquiry committee investigating allegations of corruption against Justice Yashwant Varma.

time to read

1 min

October 22, 2025

The New Indian Express Hubballi

$1L H-1B fee not to apply to visa holders

A month after US President Donald Trump's proclamation jacking up the fee for H1-B visas to a steep $100,000 caused panic among international students and professionals, the US government has now clarified that the fee won't apply to most current visa holders and recent international graduates.

time to read

1 min

October 22, 2025

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