Reflections on the Volcker Rule: Innovations in the Financial Services Industry and Fixing Too Big to Succeed

Abstract Ever since the financial crisis of 2007–2008, the policy community has woken up to the pressing need for reform of the banking and financial sector. An important goal is to institute structural changes that would maintain robust financial markets and the use of innovative financial products, while preventing the corrosive social and political crises that have bedeviled the world since 2007–2008. The authors analyze and critique how recent rule changes in proprietary trading (Volcker Rule), emergent knowledge about banking structure and the scope of activities of banks, may be employed to reduce systemic risk in the future, and thus avoid costly financial collapses, and damaging political-economic fallout.