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Prevention and Cure: Securing Financial Stability After the Crisis

Prevention and Cure: Securing Financial Stability After the Crisis

The financial crisis of 2008 led global leaders and regulators to focus more than ever before on the need to manage systemic risk in the financial system. The fact that the system was carrying levels of risk that threatened its survival and could not be managed without government assistance came as a shock to many. The realisation led to state interventions on an unprecedented scale. While few would still argue against the decisions to invest substantial public funds in supporting the system through the crisis, it is clear that neither our politicians nor those they represent will accept a reoccurrence. Lessons have been learned from the crisis. Now it is time to look forward, to ensure that taxpayers need never again be called upon to bail out failed financial institutions on that scale.
This leads us to consider how to manage and regulate systemic risk, by which we mean the situationin which levels of risk being carried within the financial system and the inter-connectedness of the institutions themselves mean that the failure of one firm could endanger not only other firms but also the functioning of the entire system.As an organisation that brings together the majority of the pan-European banks, AFME believes this is essential for the protection of the wider economies that the financial system supports.