Gary Cohn, COO at Goldman Sachs, warned that in trying to make banks safer, global regulators risked spreading new dangers throughout the financial system

James Marlay

Livewire Markets

Gary Cohn, COO at Goldman Sachs, warned that in trying to make banks safer, global regulators risked spreading new dangers throughout the financial system. By forcing banks to build up larger capital buffers to absorb losses and hold more liquid assets, regulators are sending borrowers to other, less-capitalised ''shadow banks'', he said. While he stressed he was not comparing shadow banking to sub-prime lending, he said that policies that forced banks to withdraw capital from the financial system threatened to choke growth, encourage shadow banking, and restrict banks' ability to trade in financial markets. ''When you sort of push the air around in a balloon it has to come out somewhere else,'' Mr Cohn said. ''So if you're telling banks to build capital, and make themselves unbelievably robust and make themselves sort of foolproof in their capital footings, then someone will jump into that void.''(VIEW LINK)


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