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Do universal banks need special regulatory treatment?
Following the recent financial crisis, a number of commentators attribute particular blame for the crisis to universal banks and are advocating special regulatory treatment of such banks in the future. Universal banks are broadly those that combine global retail, commercial and investment banking. Proposals have included splitting the investment bank from the retail bank, or imposing additional capital requirements on universal banks.
Frontier (Europe), in a report for Barclays (a universal bank), has analysed the role of such banks in the crisis. Our analysis suggests that universal banks played no special role in the financial crisis and that general regulatory proposals already address the causes of the crisis, such that special regulatory treatment is not required.
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