Institutional Resilience in Banking Systems

This is a condensed version of Salter and Tarko (2018), presented at the Austrian Economics in the 21st Century conference in Rosario, Argentina. I argue that current perspectives on banking and financial regulation, including newly popular proposals for macroprudential regulation, cannot achieve their objective. Admittedly banking and financial systems need to be governed, to overcome collective action problems that can hinder the stability of the system. But this stability can be an endogenous feature of self-regulation. I contend that the governance institutions in historical free banking systems succeeded in making those systems resilient. These institutions permit us to classify free banking systems as polycentric systems for banking and financial governance