Geneva 27: Much Money, Little Capital, and Few Reforms

This report examines the 2023 banking turmoil in the US and Switzerland, arguing that the failures stemmed from incomplete post-crisis reforms and vulnerabilities generated by prolonged expansionary monetary policies. Low interest rates and quantitative easing led to maturity mismatches, culminating in liquidity withdrawals and solvency problems as rates rose. The authors advocate for integrating monetary and financial stability policies, strengthening lender-of-last-resort regimes, and improving supervisory and resolution mechanisms globally, especially for systemic banks. Specific recommendations include completing the European Banking Union and mandating prompt equity raises for US banks facing capital shortfalls amid commercial real estate exposures.