Global Financial Crisis

August 23, 2012

The global financial crisis that started in 2007-08 and remains with us today has overtuned three primary assumptions in the global, and particularly U.S. and European banking system. These assumptions were: (a.) that modern capital markets were so advanced that they would be able to find active sources of liquidity, (b.) that credit agencies could accurately assess the financial strength, solvency and risks of institutions and financial instruments, and (c.) that the securitization of risk through the use of complex financial instruments would make banks themselves more secure. Since the collapse of Lehman Brothers in September 2008, it been the policy of the U.S. and European central banks not to only inject liquidity into financial markets, but also to reinforce a sense of confidence within investors as well. While these significant interventions have brought some stability to global markets, structural problems and imbalances remain. Individuals and corporations still hold illiquid assets on balances sheets and the risk profiles of many financial products remain inadequately defined. Banks face the renewed challenge of depositors. This panel will address these aspects of the financial crisis and ask 1) how liquidity can be returned to the market, 2) how risk can better be understood and 3) how banking can remain innovative and work within the best interest of investors, customers and governments.