Banks receiving government support should face tough regulation, says Jean Tirole who has won the Nobel Prize in Economic Sciences this year.
An economics professor at the University of Toulouse, Tirole’s work on regulating powerful companies and unbalanced markets helped him secure the prize.
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In an interview with Bloomberg Television, Tirole said that regulation is not about preventing firms and banks from functioning; instead there should be stringent rules to prevent banks from gambling with taxpayers’ money.
Tirole opined that the biggest problem is finding a solution on how to allow large banks to fail without a bailout.
He stated: "Size is a complex matter because you can be a big bank that is diversified and, conversely, the smaller banks, they can fail."
There have been a lot of improvements, like more emphasis on liquidity" rules, he said. "The main thing is to get banks not to take too much risk," Tirole added.
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