The language of rules: textual complexity in banking reforms

Staff working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 24 October 2019

Staff Working Paper No. 834 

By Zahid Amadxarif, James Brookes, Nicola Garbarino, Rajan Patel and Eryk Walczak

The banking reforms that followed the financial crisis of 2007–08 led to an increase in UK banking regulation from almost 400,000 to over 720,000 words, and to concerns about their complexity. We define complexity in terms of the difficulty of processing linguistic units, both in isolation and within a broader context, and use natural language processing and network analysis to calculate complexity measures on a novel dataset that covers the near universe of prudential regulation for banks in the United Kingdom before (2007) and after (2017) the reforms. Linguistic, ie textual and network, complexity in banking regulation is concentrated in a relatively small number of provisions, and the post-crisis reforms have accentuated this feature. In particular, the comprehension of provisions within a tightly connected ‘core’ requires following long chains of cross-references.

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