Learning from Crises: Regulation and Future Risks

Each crisis has prompted reforms. After 2008, the Basel III standards agreed in 2010 required banks to hold more and higher-quality capital and to keep enough liquid assets to survive a period of stress. The Financial Stability Board, created in 2009, coordinates oversight of the global system, and regulators now run regular 'stress tests' and impose extra requirements on the largest, systemically important banks. Many central banks adopted 'macroprudential' tools, such as limits on mortgage lending relative to home values, to cool credit booms.

Yet risks shift: activity has moved toward less-regulated 'shadow banks', and rising interest rates in 2022–23 exposed banks holding bonds that lost value, contributing to the collapse of Silicon Valley Bank and the rescue takeover of Credit Suisse in March 2023. Economists Carmen Reinhart and Kenneth Rogoff, surveying eight centuries of crises, warned against believing 'this time is different'. The lasting lesson is that finance must be watched continuously, because new forms of risk keep emerging.