Financial Regulation Nine Years On from the Global Financial Crisis—Where Do We Stand?

In assessing where we are eight years after the financial crisis, I would make three broad observations. First, we have made considerable progress in bolstering the safety and soundness of the global financial system. In the U.S., which was the epicenter of the crisis, the risk of a failure of a systemically important financial firm has declined considerably. Second, although significant progress has been made toward ending “too big to fail,” there is still much more to do. While the risk of failure of a global systemically important financial institution has diminished, it has not been eliminated. Without a well-functioning resolution process, the consequences of such a failure could still be catastrophic. Much headway has been made in the U.S. in developing a Single Point of Entry resolution regime with a layer of total loss-absorbing capacity (TLAC) that would facilitate recapitalization and enable an orderly resolution. However, significant challenges remain, especially on managing resolution on a cross-border basis. Third, bank leaders still have much to do to rebuild the trustworthiness of their industry. Long after the financial crisis, conduct failures have persisted. We need financial firms to foster cultures that are intolerant of bad conduct and that are attentive to incentive structures that may encourage such behaviors.
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