Banks will always blow themselves up, regulator warns

Michael Cohrs, a former Goldman Sachs banker who now sits on the Financial Policy Committee, said regulators may be trying too hard to “re-fight the last war” and that “allowing financial companies to blow themselves up, and then try and deal with the fall-out, may be – whether we like it or not – the reality of where we end up”.

Speaking at the University of the West of England, he also warned the authorities against forcing banks to increase lending, saying it was “no silver bullet” for the current economic malaise. Higher lending risked weakening the banks as most households and businesses were trying to pay off their debts and those wanting more debt were the least creditworthy.

“If we push too hard on the lending theme, we will simply raise default levels, as more of the borrowers will not be creditworthy,” he said. “There is no silver bullet to quickly fix the current economic situation.”

Drawing attention to the wide variety of financial crises over the past 200 years, Mr Cohrs said: “We shouldn’t pretend we can eliminate financial crises completely. Nor that the next crises will necessarily be a carbon copy of the last one.”

via Banks will always blow themselves up, regulator warns – Telegraph.

via Banks will always blow themselves up, regulator warns – Telegraph.