IT HAS taken four years, but there are finally signs that the lessons learned during the 2008 financial crisis are turning into action.
This week, we report on new tools that can be used both to monitor the health of the entire financial system and to spot individual institutions that are 鈥渢oo connected to fail鈥� (see 鈥�The financial meltdown forecasters鈥�).
The increasing acceptance of such tools by financial regulators is reassuring, but only up to a point. Those tools that have been publicly described still fall well short of the global monitoring system that features on forward-thinking bank supervisors鈥� wish lists. Of necessity, they cover only financial instruments for which transaction data is available, and only firms whose holdings have been detailed. And, critically, they are constrained by legal and geographical boundaries that finance itself barely recognises.
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Banks have long fought shy of revealing more data even privately to their regulators, hiding behind the fig leaves of client confidentiality and competitive advantage. But such reticence is unbecoming when taxpayers stand to foot the bill for their mistakes. Firms that have nothing to hide should prove it.