In a world of businessmen and financial intermediaries who…
“In a world of businessmen and financial intermediaries who aggressively seek profit, innovators will always outpace regulators; the authorities cannot prevent changes in the structure of portfolios from occurring. What they can do is keep the asset-equity ratio of banks within bounds by setting equity-absorption ratios for various types of assets. If the authorities constrain banks and are aware of the activities of fringe banks and other financial institutions, they are in a better position to attenuate the disruptive expansionary tendencies of our economy.”
About This Quote
This interpretation was drafted with AI assistance. It is one reading of the quote, not the author's own explanation.
Innovators outpace regulators, but authorities can limit bank risk by setting equity ratios, mitigating disruptive expansion.
In simple terms: Innovators move faster than rules; banks need equity limits.
Key Takeaway
Use equity caps to curb risky growth.
Themes
finance
regulation
innovation
risk management
Mood
cautious
analytical
Type
policy
economic
When to use this quote
- bank oversight
- portfolio management
- economic policy
- risk assessment
Key Concepts
financial stability
regulatory policy
systemic risk
Questions to Reflect On
- How can regulators keep pace with financial innovation?
- What equity ratios best balance growth and stability?
A Different Perspective
Regulators may lack tools to fully control shadow banking.