Download the BookConservative bankers may sound like an oxymoron now, but there was indeed a time and age when bankers were known for their prudence. Within a matter of decades, bankers went from being considered ‘pillars of society’ to being widely reviled.
‘Credit’ comes from the word for trust in Latin (accreditivus) so it is scarcely a matter of surprise that this breakdown of trust overlaps with the biggest credit crunch in a generation. Clearly, governments need to continue to make efforts to restore credit flows in the economy in the short term. However, restoring trust in financial services to the extent that credit can again flow without the help of government support will be much harder.
This trust can only be earned through a combination of structural changes to banking, eagle-eyed supervision, tougher regulations, and limiting incentives to take on excessive risks with perhaps a little bit of banker contrition.
Download our paper for the European Parliament on EU Crisis Management The ongoing EU economic governance debate is far too narrow and, to make matters worse is based on a number of flawed implicit assumptions. The discussion on how to prevent the recurrence of a future sovereign crisis in the Eurozone assumes that the crisis was a result of the lack of willingness rather than a lack of ability on behalf of MS governments to take appropriate corrective measures.
Re-Define launched its new Book "The Financial Crisis - Causes and Cures" in Brussels at the end of April. This will be widely circulated and made available free of Charge in the last week of June as part of our public service mission. It will also be downloadable from the Re-Define website.
Our new paper for the European Parliament highlights how old approaches to international governance are increasingly out of date in the day and age of increasing globalization. We now live in a world that is highly interconnected, is full of externalities and is increasingly fast paced. (Available for download in our publications section)
The ever faster and larger cross-border flows of commerce, people, and information technologies has reduced the idiosyncratic risks by allowing us access to an increasing array of options for example for investments or suppliers. At the same time, the higher degree of interconnectedness that this has brought about means that the risk of system wide failure – the dominoes all falling together - has increased significantly as demonstrated by the recent world wide collapse in cross border finance and trade.
Existing international governance structures to pursue shared global goals and manage externalities were designed at a time when systemic risk, externalities and the pace of change was much slower. These institutions and their approach to global governance now look increasingly out of touch. There is an urgent need to plug this governance gap that grows by the day.