Summary “After the crisis”
On Friday, Deputy Governor Lars Nyberg held a speech presenting his view of the manner in which the regulations governing the financial sector need to be changed as a consequence of the crisis.
The regulation of the financial system is an issue that becomes front-page news in every financial crisis. Naturally, the crisis we have recently been through is no exception. All sorts of recipes have been suggested for a more stable financial system, some more appetising than others. However, one view that the great majority share is that the rules of the game need to be tightened up. The only questions are how much and in which manner.
Lars Nyberg argued that the work of reform is not really about discovering a new recipe for financial stability. Rather, it is a matter of adding more of the ingredients we already have. This is because, as I see it, the crisis can largely be explained by a lack of three things: There was too little capital. There was too little liquidity. And there was far too little focus on the overall system-wide risks that had built up in the global financial system over a longer period of time.
In the future, more of these scarce resources will be required.
Mr Nyberg also argued that it is important that we are alert and ensure that the regulatory reforms following the crisis do not impair the financial system’s ability to fulfil its useful social functions. In the end, reform work is basically an issue of finding a reasonable economic balance between the risks and returns of the financial system.
Read the whole speech in the PDF file below.
