Conference Memo: How Far Have We Come? Setbacks and Successes Since the Global Financial Crisis (2014)

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The global financial crisis, perhaps more than any other event in recent economic history, has highlighted the need for robust regulation and supervision of the financial system. The crisis laid bare a flawed system of financial governance, designed to minimize constraints on private-sector institutions and limited to a small fraction of financial activity, which did little to prevent the build-up of systemic risk in the years before the crisis. While the need for far-reaching reform is urgent, however, efforts to strengthen financial regulation in the five years since the crisis have experienced mixed fortunes. How much real progress has been made in reforming financial governance at the domestic, regional, and international levels?

These issues raise deeper questions about whether the discipline of economics can, in its current state, help us to truly make sense of the crisis and thus provide useful guidance to regulators seeking to prevent it from happening again. Standard economic models have been criticized for ignoring the possibility of financial instability, assuming away financial distortions created by the political system, and understating – or even denying – the benefits of robust financial regulation and supervision. Is economics out of touch with financial realities? What can be – and is being – done to address these problems?

This workshop memo seeks to shed light on these questions by drawing on insights from the Financial Policy Workshop co-hosted by Nuffield College and the Global Economic Governance Programme at Oxford University on 13th June 2014, which brought together a large number of distinguished academics, regulators, and members of the finance industry to discuss financial governance issues in the wake of the crisis. The memo highlights the key points and arguments made in the workshop’s three panel sessions, before identifying key takeaways for the academic and policy-making community.