revisit the necessity for complexity. As the financial system gets more and more complex and sophisticated, there is a tendency to make regulation also more complex to address some of the newly emerging issues. However, this may
backfire. First, increasing the complexity of the financial regulation may provide the industry players with stronger incentives to make their institutions more complex. Second, complex financial regulation opens the door for manipulation of rules on the side
of financial institutions and investors, as shown by empirical evidence. Hence, it is important to complement ever increasing complex regulation with some simple rules. For example, going back to a simple leverage ratio in the new Basel accord in addition
to risk-weighted capital requirements is a step in the right direction. Similarly, while it might make sense to apply price-based regulation to banks that want to be active across different business lines (as in the form of ring-fencing), outright prohibitions
might be needed in other cases (as is the case for the Volcker Rule).