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Capital and liquid balance protects against crisis

Brunel researchers have helped find the perfect ratio of capital and liquid assets in order to lower the probability of financial crisis.

The work, by professors Ray Barrell, E Philip Davis and Dilruba Karim, meant they became established experts in the field.

When the banking crisis of 2007/8 reared its head the Financial Services Authority (FSA) sought out research into the causes and consequences of crises and approached the Brunel team.

The group produced a recommendation that capital should be increased by 4% - a result that was adopted by the G10 Central Bank Governors and the Bank for International Settlements in Basel as the basis for changes in regulation.

The team’s work has been presented around the globe, before the European Central Bank, FSA, OECD, Bank of England, Bank of Ireland and the United Nations.

In 2011, Prof Davis was asked to join the International Monetary Fund’s advisory group on macroprudential policy and Prof Barrell has joined a group of advisors at the Bank of England.