Donald Kohn says that the establishment of the Financial Policy Committee (FPC) brings an important macro-overview to the job of regulating the financial system. But he argues it is private decisions that will ultimately determine financial stability, despite the best efforts of regulators. In the build up to the crisis, badly informed private sector decisions resulted in financial instability. "A variety of risks were poorly understood, poorly managed, and badly priced", he says. "Institutions, markets, instruments, and the interactions in the financial system became more opaque in the years leading up to the crisis."
Published on
06 September 2011