As we all know only too well, heightened concern over counterparty risks led to severe dysfunction in financial markets, particularly after the collapse of Lehman Brothers and the bailout of AIG in September 2008. The problems surfaced most acutely in the United States.
Thus we have observed the bold attempts at regulatory overhaul in the U.S., of which the so-called Volcker Rule has become something of an icon. In my understanding, the Volcker Rule is designed to deter banks from taking excessive risk in capital markets, where volatility is inherently high and in which bankers do not necessarily have informational advantage in predicting market developments.