The fostering of transparency as concerns financial institutions, financial markets and financial products is therefore one essential policy lesson from the present crisis. Our latest experience with systemic risk Let me now apply the relevant elements of this framework on how to think about systemic risk to the present crisis.
A particularly relevant source of systemic risk was the build-up of widespread financial imbalances – the second form of systemic risk I described – in the period of 2003 to 2007. The years prior to 2007 were characterised by low financial market volatility and risk premia, rapid financial innovation in credit markets, low interest rates across the maturity spectrum and ample liquidity conditions.