Deutsche's pain a sign bank regulation is working

London

DEUTSCHE Bank's jitters have revived memories of 2008. Like that turbulent autumn eight years ago, investor confidence in one of the world's largest lenders has been shaken. Deutsche's share price has dropped and hedge funds are reported to be withdrawing spare cash. Chief executive John Cryan's assurance that the bank has "strong fundamentals" echoes the futile reassurances issued by the bosses of Lehman Brothers and Royal Bank of Scotland before those institutions failed.

Yet, despite its many problems, Deutsche is far better equipped to absorb a shock than it was eight years ago. So is the financial system as a whole. This is because of the efforts of bank regulators.

After the collapses and bailouts of 2008, watchdogs set out to make banks more resilient. They forced lenders to raise more capital, and maintain greater reserves of liquid assets that can be sold in a panic. They reduced links between banks by forcing derivatives into centralised clearing houses. And they embarked on the legal and administrative challenge of ensuring that even a large lender could be safely …