Banking Reform: Tinkering leads to bureaucratic monster

Reports that the BIS wants to collect more data about risk exposures in banks confirms our argument that current efforts to reform the banking system lead to more and more intrusive micro-management (and second-guessing) of decision-making in banks. The key problem with the banking system today is that there is simply no safeguard against a bank run. The system relies on the illusion that short-term deposits can be used to finance longer-term assets. Until a solution to this problem is found no amount of financial regulation will be sufficient to make the system 100 per cent safe and able to survive a panic without reliance on government support.