, providing client clearing services means devoting a significant amount of leveraged balance sheet to the activity. since client clearing is a relatively low profit - margin business, many industry participants argue that the leverage ratio is having a negative impact on clearing and is thus undermining the aim of the g20 reforms. acosta - smith, ferrara and rodrigez - tous ( 2018 ), analyse empirically the impact the leverage ratio has had on client clearing in the uk. using detailed data on interest rate derivative transactions and clearing members ’ balance sheets, the authors study the impact of two ‘ leverage ratio events ’ : the introduction of the leverage ratio as a mandatory requirement in the uk in january 2016 ; and the subsequent change in the leverage ratio disclosure requirements in january 2017 to address window acosta - smith, ferrara, rodriguez - tous ( 2018 ), ‘ the impact of the leverage ratio on client clearing ’, bank of england staff working paper no. 735, https : / / www. bankofengland. co. uk / - / media / boe / files / working - paper / 2018 / the - impact - of - the - leverage - ratio - on - clientclearing. pdf? la = en & hash = ee95d4d26969019c3e984dfb3e564b58e5c1ac93. for example, https : / / fia. org / articles / fia - analysis - leverage - ratio - proposals - will - negatively - impact - client - clearing. all speeches are available online at www. bankofengland. co. uk / speeches dressing ( see above ), which effectively made the requirement more stringent. the analysis identifies a causal effect of the leverage ratio requirements by comparing the reactions of clearing members who were subject to the introduction of the mandatory leverage ratio requirement in january 2016, and the subsequent change in reporting requirements, to the reactions of a control group of clearing members that were unaffected by these events. the results suggest that the affected clearing members became more reluctant to provide client clearing services after the events : compared to unaffected clearing members, they reduced both the number of transactions they were willing to clear on behalf of clients and their number of clients. in magnitude terms, they reacted to the january 2016 event by clearing on average 5 % fewer transactions per client and operating with around 4 - 5 fewer clients on average than otherwise. this impact on clients seems to have

not subtracts, from the knightian uncertainty problem. the us constitution is four pages long. the recently - tabled dodd bill on us financial sector reform is 1, 336 pages long. which do you imagine will have the more lasting impact on behaviour. second, faced with uncertainty, the best approach is often to choose a strategy which avoids the extreme tails of the distribution. technically, economists call this a “ minimax ” strategy – minimising the likelihood of the worst outcome. paranoia can sometimes be an optimal strategy. this is a principle which engineers took to heart a generation ago. it is especially evident in the aeronautical industry where air and space disasters acted as beacons for minimax redesign of aircraft and spaceships. third, simple, loss - minimising strategies are often best achieved through what economists call “ mechanism design ” and what non - economists call “ structural reform ”. in essence, this means acting on the underlying organisational form of the system, rather than through the participants operating within it. in the words of economist john kay, it is about regulating structure not behaviour. 23 taken together, these three features define a “ robust ” regulatory regime – robust to uncertainties from within and outside the system. using these robustness criteria, it is possible to assess whether restrictions might be preferable to taxation in tackling banking pollution. to illustrate this, contrast the regulatory experience of glass - steagall ( a restrictions approach ) and basel ii ( a taxation approach ). glass - steagall was simple in its objectives and execution. the act itself was only 17 pages long. its aims were shaped by an extreme tail event ( the great depression ) and were explicitly minimax ( to avoid a repetition ). it sought to achieve this by acting directly on the structure of the financial system, quarantining commercial bank and brokering activities through red - line regulation. in other words, glass - steagall satisfied all three robustness criteria. and so it proved, lasting well over half a century without a significant systemic event in the us. the contrast with basel ii is striking. this was anything but simple, comprising many thousands of pages and taking 15 years to deliver. it was calibrated largely to data drawn from the great moderation, a period characterised by an absence of tail events – more minimin than minimax. basel ii was underpinned by a complex menu of capital risk weights. this was fine - line, not red - line, regulation