was among those that enabled regulators to improve how they monitor individual banks. The team devised a measure called DebtRank. Inspired by Google’s PageRank algorithm, this uses data on banks’ assets and liabilities to calculate an index that reflects the risks to the financial system should a particular bank fail.
These and other studies helped to establish the evidence for a set of regulations, drafted after the 2007–08 crisis, known as Basel III. The regulations specify that large banks in many countries need to hold higher amounts of capital and liquidity than before, to reduce the risk of failure from bank runs.
But in 2018, then US president Donald Trump weakened the US rules, which were first set out in the Dodd–Frank Act of 2010. Now, both the European Union and the UK government are considering doing something similar. The UK government, for example, plans to change the law so that regulators are required to focus not only on maintaining stability, but also on growth and competitiveness. The implication is that some extra risks can be taken to boost flagging economies.