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"There is still no consensus on who or what caused the financial crisis which engulfed the world, beginning in the summer of 2007. A huge number of suspects have been identified, from greedy investment bankers, through feckless borrowers, dilatory regulators and myopic central bankers to violent video games and high levels of testosterone among the denizens of trading floors. There is not even agreement on whether the crisis shows a need for more government intervention in markets, or less: some maintain that government encouragement of home ownership lay at the heart of the problem in the US, in particular. In The Financial Crisis Howard Davies charts a course through these arguments, and the evidence advanced for each of them. The reader can thereby assess the weight to be attached to each, and the likely effectiveness of the remedies under development."- -Description viewed from website on 21 Sept. 2010

The deep recession expected as a result of the COVID-19 pandemic will leave both governments and private-sector companies with a greatly increased debt burden. That will have severe consequences for the financial system. Banks will suffer large-scale defaults on business and personal lending. To work off the debt overhang, interest rates may be held down by central banks for a long period. Inflation may rise, which would deflate the real value of debt, but inflationary pressures are currently weak. Financial repression will add to the pressures on banks and other financial institutions. Major banks enter the crisis period with high capital ratios, but expected losses on loan portfolios will put some under strain. Less strongly capitalized new entrants may suffer disproportionately. Other likely changes are more rapid growth in digital financial services and a decline in cash usage. Central banks will probably issue their own digital currencies, which will make maintaining negative interest rates more achievable. At the same time, the international financial system will be put under strain by global tensions generated by the crisis. In this complex environment, it will be crucial for governments, central banks, and the banking system to collaborate closely and for the European Union to bolster the eurozone with long-planned but long-delayed reforms, in particular to promote a capital markets union that could relieve pressure on banks' balance sheets.

AbstractRecent events have once again highlighted weaknesses in the global regulatory system. The highly complex network of bodies overseeing different parts of the financial markets failed to identify or respond to the macro trends that led to the crisis. There was too little capital in the banking system. There is also a serious accountability gap, with regulatory bodies free to work to their own timetables. And the links between macroeconomic policy makers in finance ministries and central banks, on the one hand, and regulators on the other, have been too weak. The changes made so far by the G20 summits are very modest and are unlikely to correct these flaws. There remains a particular problem in the European Union, where the crisis has shown that the single financial market requires more central coordination of regulation than the politicians have so far accepted. There remains, therefore, much unfinished business in financial regulatory reform.Policy Implications

The Financial Stability Board needs more authority to coordinate the activities of the sectoral regulators.
Financial regulation must in future be more sensitive to changing macroeconomic conditions.
There is a need for an absolutely higher level of capital in the banking system.
Europe needs a central regulatory authority, if the single financial market is to survive in its present form.

Abstract Regulators, commercial and investment banks, hedge funds and rating agencies have all borne some blame for the current global financial crisis, but could central banks have done more? It is argued in the lecture that in a number of ways central banks should have paid more attention to asset bubbles, which have high output costs. Asset prices, especially housing prices, should be identified as an explicit factor in the consideration of policy. More generally, central banks should adopt policies that 'lean against the wind'.