In Continental Europe, traditional legal thinking is rather remote from empirical research and statistics. Nonetheless lawyers have been trying for more than one hundred years to fuse knowledge about society’s “is’s and oughts”. Their attempts had to continuously adapt to changes in the dominant intellectual paradigms, and are now framed as discursive argumentation about different normatively infused descriptions of the world. As such, empirical discourse is indispensable for the law and will shape legal education in the future. Complex legal realities require statistical legal thinking.
Banks typically grant long-term loans, but their liabilities are short-term. While this maturity transformation is one of the main features of banks, it also constitutes a major risk factor. A research project at the Max Planck Institute for Research on Collective Goods shows that a strong government can reduce the refinancing risk of banks by providing them with government bonds. In case of countries that are financially interconnected, all parties might benefit if the strong country protects weaker ones by forming a banking union.
The comprehensive reform of banking regulation that was promised in the financial crisis has not been undertaken. Yet, society as a whole has an interest in using regulation to limit borrowing by banks. The determination of banks’ indebtedness and default risks cannot just be left to the banks and their creditors. The arguments that the industry puts forward against higher equity requirements are shown to be fundamentally flawed.