Some economics of banking reform

Where do we stand, five years on from the start of the crisis, on progress towards banking reform? Following a stock-take of current reform initiatives, the paper reviews some econom-ics of public policy towards banks, in particular capital re-quirements and the role of structural regulation in making banking systems safer. Forms of separation between retail and investment banking are compared, notably ring-fencing and complete separation. The paper concludes with reflections on the wider European policy debate following the Liikanen Re-port. A central theme is that banking reform needs a well-designed combination of policies towards loss-absorbency and structural reform. [JEL Classification: G21; G28; L51]