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After the crisis: Should law firms self-impose capital adequacy standards?

William Arthur considers whether law firms should self-impose capital adequacy standards to ensure long-term financial stability

22 September 2014

Should law firms take inspiration from the banking sector, and self-impose capital adequacy standards? A rather trite and self-satisfied answer would be that the banking sector has largely created its own crises over decades (and centuries), that its problems are varied but largely specific to the sector, and that law firms have nothing to gain by emulating the approach of banks.

An alternative response, and perhaps more realistic and humble, would be to acknowledge that law firms are subject to competitive and financial pressures unlike any they have previously experienced, and their instinct for self-preservation should cause them to embrace best practice wherever it may be found. As such, partners should require and empower a self-regulatory regime of the highest standards.

Regulatory reach

The banking sector has no choice about capital adequacy and is subject to the progressive constraints of the Basel agreements in th...

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