Climate change is one of today’s most salient policy challenges. Under the Paris Agreement, 195 governments agreed to limit temperature increases to well below 2, preferably 1.5, degrees centigrade relative to pre-industrial levels. Since the magnitude of global warming is roughly proportional to the amount of carbon in the atmosphere, the agreement in effect specified a “carbon budget.” To stay within that budget, emission reductions equivalent to what was forced upon us by the worst pandemic in 100 years need to occur every two years throughout the 2020s and beyond. Clearly, just “doing less” is not going to cut it … Read more
Shocks to only part of the financial system, such as the collapse of the subprime mortgage market in 2007, can spread and intensify through the complex interconnections among financial and non-financial institutions to become systemic threats. The consequences can be catastrophic, prompting economists and regulators to study and find ways to curtail such threats by using network theory. Legal scholars, however, have so far largely overlooked that approach, as have policymakers. Most financial regulation remains atomistic, in that it fails to account for the fact that each individual is part of, and plays a role in, a wider network.
In … Read more
A key policy of UK financial regulation since the financial crisis has been the ring-fencing of retail banks into separate and independently operated entities, so-called “ring-fenced bodies” (RFBs), distinct from entities that carry on other, and especially investment, banking activities within the same corporate group. Such structural regulation of the banking sector – which went into effect on January 1, 2019, for all UK banks with more than £25 billion of retail deposits – was introduced to ensure that retail banks were less likely to fail. Proponents of ring-fencing argue that it does so in at least three ways. First, … Read more