These reforms are designed to respond to key pre-crisis shortcomings, which became painfully evident during the crisis. The banking sector entered the crisis with too much leverage and inadequate liquidity buffers. These were accompanied by poor governance and risk management as well as inappropriate incentive structures, especially related to compensation.
The combination of these factors was manifest in poor underwriting, the mispricing of credit and liquidity risk, and excess credit growth. When the crisis hit, these shortcomings and weaknesses in the banking sector amplified and deepened the downturn.