For example, efforts to limit leverage used to finance securities positions, such as the Financial Stability Board’s (FSB) recently finalized standard on minimum and potentially countercyclical haircuts on securities financing transactions, represent a further step in the right direction.
As the financial system evolves, we will want, as my colleague Daniel Tarullo emphasized a few weeks ago, “to pursue a policy of case-by-case assessment that permits healthy forms of nonbank intermediation while protecting the financial system.”2 Doing so will require further development of the economic models that we use to understand interconnections across our complex financial system, along with better data.