What a difference a few years makes. Or not, in the case of banking regulation, says Anat Admati, a Stanford University economist who studies banks and finance.
During an interview on the sidelines of this weekend’s American Economic Association confab in San Diego, Ms. Admati warned that, despite the effects of the Great Recession, the world’s big banks remain too large, too fragile, too indebted and too interconnected in hard-to-predict ways.

Rather than building huge cushions of capital to protect themselves from potential losses, for example, some banks have returned cash to shareholders, she says. Banks still finance themselves heavily with debt, not equity, even though massive indebtedness, especially short-term debt, got them in trouble in the first place. This underlying fragility of the banking system augers more crises, Ms. Admati argues.

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