No abstract

The global financial crisis shattered the conventional wisdom about how financial markets work and how to regulate them. Authorities intervened to stop the panic-shortterm pragmatism that spoke volumes about the robustness of mainstream economics. However, their very success in taming the collapse reduced efforts to radically change the "big bank" business model and lessened the possibility of serious banking reformmeaning that a strong and possibly even bigger financial crisis is inevitable in the future. We think an overall alternative is needed and at hand: Minsky's theories on investment, financial stability, the growing weight of the financial sector, and the role of the state. Building on this legacy, it is possible to analyze which aspects of the post-2008 reforms actually work. In this respect, we argue that the only effective solution is to impose a global cap on the absolute size of banks.

The Joint Research Centre (JRC) of the European Commission and the European Banking Authority (EBA) organized a workshop on November 18-19 at the JRC in Ispra (Italy) on "Banking Regulation and Sustainability". The joint JRC-EBA Workshop moved forward on the various challenges related to integrating sustainability into the EU banking regulation framework. It brought together academics, supervisors, policymakers and industry representatives, promoting a structured dialogue on how banks could measure and manage risks related to the environmental, social and governance dimensions. This report summarizes their contributions.