With all of this in mind, there are four broad categories of regulatory initiatives under consideration. The first, and most important, is indirect regulation through limits on the size and nature of banks’ exposure to shadow banking entities. Examples include tighter consolidation rules for bank-sponsored conduits and higher risk-based capital requirements for liquidity lines.
A successful exit from the strong fiscal expansion in the wake of the recent crisis will require ambitious measures and a strong political will regarding implementation. I am confident that European fiscal policy makers will succeed in restoring the sustainability of public finances.