A generation or so ago, we could have relied upon separate regimes for banking and for securities markets. In that far-off world, banks extended and held illiquid loans, overseen by
banking supervisors. And, in a largely separate universe, securities regulators policed the integrity of individual transactions and offerings on public exchanges served by specialist intermediaries.
The growth of private markets – over-the-counter, derivatives, securitisation – and of banks as intermediaries in capital markets has changed all that, as the 2007–09 crisis cruelly exposed.
The revolution, whether we like it or not, has been the fusion of banking and capital markets.
Even the most limited forms of commercial banking involve hedging of customer business in interest-rate and foreign-exchange markets. Wholesale loans to medium-sized and large companies, loans that are syndicated and traded, lie in the intersection of commercial and investment banking.
The solutions to the problems of global finance have to cover securities markets as wellI would ask that you re-read his summary as it highlights several critical issues.
- Securities regulators have historically deferred to the primacy of bank regulators for all bank related matters.
- Banking and capital markets have fused; and
- Solutions have to cover both the securities market and banking.
Would the securities regulators have adopted the same disclosure that we have now that the Bank of England's Andy Haldane says leaves banks resembling 'black boxes'?
Or, would the securities regulators have adopted ultra transparency and required banks to disclose on an on-going basis their current asset, liability and off-balance sheet exposure details?
There is reason to believe that securities regulators would have adopted ultra transparency because this is the information that bank supervisors have access to and use so that they can oversee banks.