Geoffrey Wood, “Thoughtful regulation”

Geoffrey Wood, “Thoughtful regulation”, in P. Booth (ed.), Verdict on the crash: Causes and policy implications (London: Institute of Economic Affairs, Hobart Paperback 37, 2009), 171-176. ISBN: 978-0-255-36635-9.

Professor Wood’s chapter, entitled “Thoughtful regulation”, deals with the regulation of smaller and larger banks, advocating preparedness at all times so as to avoid a disaster on the scale of Northern Rock. Professor Wood recommends a “plan for every bank” and that these plans should be regularly updated. The regulators should also plan and make clear that they have planned to sell off in parts, not as a whole, any large bank which has been taken over. They would thus reduce problems of competition, encourage management to be cautious, and they might get rid of “one of these troublesome big banks”, creating instead more banks of a size which would not be “too big to fail easily”. Thoughtful regulation, which should not mean more detailed micromanagement of banks, means careful thought about regulatory structures and incentives.

Mr John Blundell of the Institute of Economic Affairs, who has written the introduction to the book, specifies that the authors in Part Two, of whom Professor Wood is one, are suggesting that regulators be called properly to account and that they must never be allowed to suffer from ‘mission creep’.

The book is available from the Institute of Economic Affairs website (external link).

Geoffrey Wood is Professor of Economics at Cass Business School and Professor of Monetary Economics at the University of Buckingham, where he teaches on the undergraduate Economics programme and the MA in Global Affairs.

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