Balancing the Banks: Global Lessons from the Financial Crisis »

Mathias Dewatripont is professor of economics at the Universite Libre de Bruxelles (ECARES and Solvay Brussels School of Economics and Management), annual visiting professor of economics at the Massachusetts Institute of Technology, and research director of the Center for Economic Policy and Research. Jean-Charles Rochet is professor of mathematics and economics at the University of Toulouse I. Jean Tirole is chairman of the Foundation Jean-Jacques Laffont at the Toulouse School of Economics, scientific director of Toulouse's Industrial Economics Institute, and annual visiting professor of economics at the Massachusetts Institute of Technology.

"Three giants in the field have teamed up to offer their insightful perspectives on prudential regulation at a crucial time. The book is both academic and pragmatic, a real bridge between these two worlds. Mandatory reading for all policymakers and academics involved in the difficult subjects of banking regulation and crisis prevention."--Ricardo Caballero, Massachusetts Institute of Technology

"This is a very good book on the financial crisis by three of the best economists in the world. Unusually among top economists, all three are knowledgeable about banking and the financial system. It will have an important impact on the debate about the reform of regulation."--Franklin Allen, Wharton School, University of Pennsylvania

"This timely book provides valuable insights and suggestions from three of the foremost experts in the field of regulation."--Markus K. Brunnermeier, Princeton University

"This book offers a clear analysis of the financial crisis: causes, mechanisms, and policy. Written by top experts in economics and prudential regulation, it will be read by many economists and graduate students, as well as journalists, policymakers, the general public, and advanced undergraduate students. The scholarship is top-notch."--Xavier Gabaix, New York University

Acknowledgments vii

Chapter 1: Introduction by Mathias Dewatripont, Jean-Charles Rochet, and Jean Tirole 1
Regulation in a Historical Perspective 1
To Regulate or Not to Regulate? 3
The Challenges Facing Prudential Regulation 6
Building an Adaptive Regulatory System in a Global World 7
Keeping a Balance 8

Chapter 2: Lessons from the Crisis by Jean Tirole 10

Part I: What Happened? 11
Part II: How Should the Financial System Be Reformed? 47

Chapter 3: The Future of Banking Regulation by Jean-Charles Rochet 78
The Basel Accords 78
The Breakdown of the Basel Prudential Regime 86
The Necessary Reforms 100

Chapter 4: The Treatment of Distressed Banks by Mathias Dewatripont and Jean-Charles Rochet 107
Reforming Prudential Policy for Distressed Banks 110
Macroeconomic and Systemic Considerations 118
International Cooperation 122

References 131
Index 137