The Future of Banking Regulation in Developed Countries: Lessons from and for Europe


  • By Harald Benink,

  • George Benston

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    We thank Charles Goodhart, Geoffrey Wood and the participants of the Future of Banking Regulation Conference for their valuable comments.


If the bank regulatory structure in developed countries, particularly those in the EU (as well as the US), were not changed, considerable private and social costs could be incurred. We first outline the current EU regulatory framework and describe and analyze recent bank crises and failures. Based on this record and on the (beneficial for consumers) changes in EU banking regulation, on new data on bank capital/asset ratios in ten European countries, and on an analysis of market and technological changes, we conclude that the present regulatory structure is unlikely to achieve banking stability in the future. We then propose and describe a regulatory framework that can deal effectively with this situation and show how it would affect EU banks.