The Great Financial Crisis. Economics, Regulation and Risk

International banks and the global financial system are in the midst of a crisis which can be compared to that of 1929-30. The eight chapters of this books offer an explanation of the financial turmoil, by identifying underlying factors, proximate causes, spillover and domino effects. The crisis revealed serious oversights of monetary, regulatory and supervisory nature, as well as major corporate governance failures, in spite of clear indications of the dangers that were building up. Special attention is drawn to the procyclical impact of the current regulatory framework, notably with regard to the rise and fall of US investment banks. The first five chapters develop an analytical framework of the crisis, as it unfolded in 2007-208 (end-October 2008 is the cut-off point of the analysis and information). The following two essays describe the workings of the new main actors in the international credit process during the crisis – Sovereign Wealth and Hedge Funds -, while the last chapter offer an interpretation of the Great Depression of the 30’s in the light of the capital standard. The book identifies regulatory and supervisory weaknesses and offers suggestions to build a more solid financial system. In particular, transparency and accountability of markets and intermediaries; improved functioning of derivative markets, better corporate governance, strengthened risk monitoring and control, and dampened cyclicality of capital and accounting standards are underlined and highlighted.