The EU was once a champion of global financial regulatory convergence. What happened? This column argues that the EU should drop its lacklustre inertia and pursue Basel III because, in the end, it’s in its interests to comply. EU policymakers ought to aim at enabling the adoption of a Capital Requirements Regulation that would be fully compliant with Basel III.

Do financial institution managers only owe enforceable duties of loyalty, competence and care to their stockholders and explicit creditors, but not to taxpayers or government supervisors? This column argues that in the current information and ethical environments, regulating accounting leverage cannot adequately protect taxpayers from regulation-induced innovation. We ought to aim for establishing enforceable duties of loyalty and care to taxpayers for managers of financial firms. Authorities need to put aside their unreliable, capital proxy: they should measure, control, and price the ebb and flow of safety-net benefits directly.

Internationally prominent economists and politicians have been pushing for effective implementation and better coordination of the new financial regulations currently under construction across the globe. This columns argues that at a time of crisis, financial regulators were forced to act on systemically important assets and liabilities, rather than just on the individual financial institutions holding them. A key turning point towards better regulation will be when we recognise the need for such action ahead of time, building the essential infrastructure that ensures excessive risk-taking is discouraged.

The UK’s Independent Commission on Banking set out to make banking safer, to ensure that what just happened won’t happen again, and to change both the structure and regulation of banking as needed. But this column argues that the Commission fails to achieve any of these aims. It instead proposes a new way to make the financial system and wider economy safer.

While financial reform is underway around the world, this column argues that much more needs to be done.

Supervisory failures were key to the 2008 financial crisis. This column argues that supervisory governance has improved but that more is needed. The reforms should include a separation of macro- and micro-supervision since this allows for checks and balances that complement and strengthen governance.

Innovation is the heart of economic growth. This column presents evidence that the structure of a nation’s banking sector matters for innovation. The authors present evidence that when the banking market is very competitive and dominated by large banks, lenders are less able to fund innovation, as lending relationships can no longer be sustained.

Liikanen, Vickers, and Volcker all question current banking-trading links. This column offers analytic scaffolding for thinking about the separation of banking and trading. Banking generates low risk returns from relationship-based activities; trading generates high-risk returns from short-term concentrated positions. The two are linked since trading allows banks to profit from the ‘spare’ banking capital, but deeper financial markets magnify problems of managing and regulating trading by banks.

Even before the crisis, many economists warned that financial innovation has a dark side. This column uses new cross-country data on financial innovation and provides evidence that financial innovation can lead to more volatility, more fragility, and more severe losses. But it also finds evidence of improved growth opportunities, better financing, and increased R&D expenditure.

The European Commission’s latest proposals for financial regulation are seen by many as the first steps towards a banking union. This column argues that there are a number of issues that need to be exposed and debated in public before the Commission decides on anything.