As world leaders gather in Hamburg, Germany for the G20 Summit this week, Olin professor Phil Dybvig fills us in on the pre-summit G7 Finance meeting he attended this spring in Bari, Italy. Dybvig was invited to present his recommendations on bank regulation and growth to the finance ministers and central bank governors of the G7 countries who in turn provide recommendations to the G20 Summit.
Prof. Dybvig was one of six distinguished academics invited to address the G7 meeting held May 11-13, 2017 on the southeastern coast of Italy at the Castello Normanno Svevo.
The G7 Finance meeting was also attended by the European Commissioner for Economic and Monetary Affairs, the President of the Eurogroup and the President of the European Central Bank as well as the heads of major international organizations.
Dybvig participated on two panels during the opening symposium: one on “Growth and Inequality,” and a second on “Finance, Regulation, and Growth.” Dybvig asserted that, “The standards promulgated by Basel are not up to the task of keeping banks safe and providing the support we need for growth.” “Basel” is short for The Basel Committee on Banking Supervision, the main international body setting standards for bank regulation.
Dybvig suggested limiting the scope of depository institutions with retail deposits, and insurance companies with retail customers. “Limiting the scope of these institutions, like a modern-day Glass-Steagall restriction, would give regulators a manageable set of activities to evaluate, and would cut the toxic linkages that make systemic risk so dangerous.” Dybvig proposed, “A modern version of Glass-Steagall would also make it possible to stimulate growth by giving financial institutions without retail deposits more freedom to meet the needs of the economy.”
Link here to Phil Dybvig’s white paper provided to the Delegations at the G-7 Finance meeting.
The G7 summit is a forum that plays an important role in shaping global responses to global challenges, complementing the economic coordination carried out by the G20. The G7 countries are Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.