Richard A. Werner, Centre for Banking, Finance and Sustainable Development, University of Southampton
Secretariat of the Basel Committee onBanking SupervisionBank for International Settlements4002 BaselSwitzerland
Comment: Strengthening the Resilience of the Banking Sector
My comments take the form of first citing the relevant passage of the ConsultativeDocument and then presenting my commentary. The passages from the report areshown in bold script and inverted commas to separate them from the comments. Asthey are already numbered, no further references or page numbers are cited. I will focusonly on the aspects of the report, where commentary is most urgently required. Lack of comment on other passages does not imply consent.
The nature of banks and their role in the economy
This is fundamental to an understanding of banking crises, bank regulation and thenecessary response to the recent financial crisis, including strengthening the resilienceof the banking sector.
“3. A strong and resilient banking system is the foundation for sustainableeconomic growth, as banks are at the centre of the credit intermediation processbetween savers and investors. Moreover, banks provide critical services toconsumers, small and medium-sized enterprises, large corporate firms andgovernments who rely on them to conduct their daily business, both at a domesticand international level.”
The document describes banks as mere financial intermediaries. However, it is a factthat banks are not just mere intermediaries, channeling savings from A to B. This,indeed, is not even their most important function. By far the most important functionand that which has most consequences for the economy and all its participants is their
PROFESSOR RICHARD A. WERNER
, D.Phil. (Oxon)
CHAIR IN INTERNATIONAL BANKINGDIRECTOR, CENTER FOR BANKING, FINANCEAND SUSTAINABLE DEVELOPMENT
Werner, School of Management, University of Southampton SO17 1BJ
Southampton, 16 April 2010Tel. +44 (0)23 8059 2549Fax +44 (0)23 8059 3844e-mail email@example.com