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Journal of Financial Intermediation Vol. 63 2025

Value creation and stability in financial services: How should we regulate banks?

Jan Pieter Krahnen1,2; Ted Lindblom3; D Lucas4; Magnus Olsson5; Paolo Fulghieri6; Anjan V. Thakor7

1 Goethe University Frankfurt · 2 Leibniz Institute for Financial Research SAFE · 3 University of Gothenburg · 4 New School · 5 Dairy Australia (Australia) · 6 University of North Carolina at Chapel Hill · 7 Washington University in St. Louis

Abstract

This paper is based on a panel discussion at the international bank conference on Frontier Risks, Financial Innovation and Prudential Regulation of Banks in Gothenburg, Sweden, June 2–4, 2024. The panelists were Deborah Lucas, Jan Pieter Krahnen, and Magnus Olsson, with Ted Lindblom moderating. This paper contains the panel presentations, along with a unifying discussion by Paolo Fulghieri and Anjan Thakor. The main themes in the paper focus on how society should balance costs and benefits in designing the prudential regulation of banks. Optimal regulation should take into account how banks and markets interact, the dangers of both under-regulation that spawns excessive risk-taking and over-regulation that depresses value-enhancing innovation in financial services, the somewhat fragmented nature of national-sovereignty-constrained European banking and financial markets regulation relative to bank regulation in the US, and how prudential regulation can be improved by more explicitly dealing with interest rate risk.

DOI
10.1016/j.jfi.2025.101169
Volume
63
Pages
101169
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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