High street banks are finding it increasingly tough going so we are informed in today’s papers. One of the reasons is that the bank regulators in all the advanced countries are forcing banks to raise their reserves ratios from about 0% (as in 2008) to 8% (pre-2008 requirement) and through further to 12 – 15%. Before the 1914-18 war, most banks had reserves between about 15% and 30% of their liabilities [credit issued] and some even higher. Regulators might want to re-adopt these ratios in the years to come.
Besides this, the other highly desirable reform that was much talked about in the early years of the 2008 Crisis, but neglected now, is to split up over-large-banks into regional or city-based ones — as they were before the 1914-18 war. If this had been in place in 2008 the Crisis would never have developed so rapidly.