The global financial crisis of 2008 brought the global financial system to a near collapse, taking a devastating toll on global growth and welfare. Determined to prevent, or at least minimise, the probability of another crisis, governments, central banks and financial sector regulators launched a vigorous effort to distil lessons from the crisis and reflect them in public policy. An important component of their reform effort revolved around banking regulation to make banks safe and stable. But policymakers also realised that, while such regulation was necessary, it was not sufficient: the crisis had demonstrated that the financial sector is interconnected and that pressure in any part of the system can rapidly spread and engulf the whole system. It was necessary, therefore, that regulatory reforms encompass the entire financial sector, including non-bank entities and financial markets. Moreover, this could not be an individual country effort; it had to be a globally coordinated effort.
This paper aims to explain the economic and political economy dimensions of the important challenges that policymakers confronted as they worked through the reform agenda. It makes a special effort to give an emerging market economy perspective on these global issues.
Global / International Political Economy / Policy Reports
Last updated on 06/01/2020