Thus, while banks will naturally hold buffer stocks of liquid assets to handle unanticipated outflows, they may not hold enough because, although they bear all the costs of this buffer stocking, they do not capture all of the social benefits, in terms of enhanced financial stability and lower costs to taxpayers in the event of failure.
How do these measures interplay? What will the outcome be? To my mind, this is a truly complex question. Another example – this time concerning the structure of the banking industry. If the US follows Volcker, the UK follows Vickers and the euro area follows a version of Liikanen, how much complexity will we add to banking?