"The Bankers’ New Clothes : What’s Wrong with Banking and What to Do about It" by Anat Admati and Martin Hellwig

Anat Admati and Martin Hellwig identify the key problems in banking as excessive borrowing and risk-taking, increased interconnectedness between banks, ineffective regulation and supervision, distortions and inefficiencies from explicit or implicit government guarantees and subsidies, and banks’ governance problems. The authors propose a simple solution: raising the bank equity requirement to 20-30 percent of total assets. They argue that this solution would significantly reduce the fragility of banks. Finally, the authors also highlight the importance of political will as an essential element for meaningful financial reform.