A decade after the acute phase of the Great Financial Crisis, Economists finally admit they cannot actually answer the question “are global banks safer”.

Why?

The banks are as opaque as they were in 2008.  Nobody knew what the risks were they were holding then and nobody knows what risks they are holding today.  Without knowing this, saying the banks are safer is pure make believe.

Of course, Economists phrase this problem slightly differently.

The conference discussion, however, revolved around important lingering shortcomings: regulation and bank leverage remain pro-cyclical and some reform agendas have stalled (e.g. the regulatory treatment of sovereign exposures and the cross-border resolution of global banks) or have been implemented unevenly (the bail-in rules); international banks remain subject to national regulation (“international banks die nationally”), which limits fiscal backstops leaving scope for regulatory arbitrage; some criticism of global banks may over-emphasise international shock and credit cycle transmission from specific economies, while undervaluing the role of international banks in international risk sharing; the rapid international growth of non-bank financial institutions highlights the absence of a level regulatory playing field with banks, and the need for the extension of stress-testing to market-based finance as well; leverage and debt have been insufficiently tamed and global debt has further increased due to  higher corporate debt levels in emerging markets and higher public debt levels in the advanced economies; partly because of this latter issue, the sovereign–bank nexus has also remained a concern; and while many central banks now have macroprudential toolkits at their disposal, an optimal regulation of credit booms requires an understanding of the sources of booms.

Furthermore, although stress-testing frameworks are an important contribution to the regulatory toolkit, certain implementation practices also raise questions about whether they are achieving their intents.

Shorter:  there is no reason to think the post-crisis regulations have made the banks safer.  The focus is still on rearranging the financial regulatory Titanic’s deck chairs.