For all the talk of financial wizardry that allows the unbundling and transferring of risks and the lightening speeds of transmission that occupy so much attention, I would like to remind everyone that, by and large, the mistakes of the past few years were rather humdrum.
In Asia, there were widespread failures of supervision and regulation, including the failure to enforce limits on lending to individual entities, to appreciate the implications of over-reliance on potentially changeable short-term sources of funding, to evaluate repayment risk on a timely basis, and to react quickly as problems emerged. In industrial countries, it was a widespread misassessment of counterparty risk.