Financial regulatory reform after the crisis

In the aftermath of the 2008-2009 global financial crisis, political leaders acknowledged that there were serious shortcomings in the way financial markets and institutions had been regulated. This was amply demonstrated by the failure of large private banks to manage risk, the unchecked expansion of a shadow banking system and the excessive reward schemes common throughout the entire financial sector. Initially, they showed a willingness for fundamental reform of the system aimed at making it more stable, less prone to crises and more resilient to shocks, as well as to orient it more towards supporting the real economy and economic development. They also recognized the need to accommodate the interests and concerns of the larger developing economies in the design of any subsequent reform agenda. Thus in late 2008, the G8 was replaced by the G20, which includes the larger developing countries, as the most relevant forum for international coordination and decision-making. Some of these countries were also given membership in the Financial Stability Board (FSB), which succeeded the Financial Stability Forum (FSF) to coordinate the activities of various financial standard-setting bodies and to take charge of monitoring implementation of the financial reforms agreed by the G20 countries.

Related Subject(s): International Trade and Finance