Lessons from the Financial Market Turmoil: Challenges ahead for the Financial Industry and Policy Makers

Wehinger, Gert
January 2009
OECD Journal: Financial Market Trends;2009, Vol. 2008 Issue 2, p33
Academic Journal
This financial crisis, ending a period of search for yield and increased risktaking, has triggered various policy responses, ranging from more ad-hoc measures initially to more structured and co-ordinated financial sector rescue actions as the crisis evolved. Lessons drawn so far should help to devise longer-term, more encompassing and more consistent policies. Various reforms are being proposed by the financial industry as well as by official authorities and international standard-setting bodies, many of which arrive at similar conclusions regarding the causes of and remedies for the crisis. Shortcomings in risk management, including compensation schemes, governance structures, liquidity and counterparty risk, need to be addressed. Enhancing transparency by improving disclosure, valuation and ratings should help to restore market confidence. Further regulatory reforms, striking a balance between stability and growth, are needed, but should be assessed with respect to their efficiency and effectiveness. Reform areas should cover cross-border regulation for banking and finance, capital requirements, the institutional scope of regulation and financial safety nets. Financial crisis mechanisms as well as multilateral global surveillance should be reinforced to make the financial system more resilient, sound and efficient.


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