Overall, these experiences can be taken to support the view – which I have voiced in several occasions in the past – that the new resolution framework does not fully take into consideration the risks associated with its own implementation and thus needs further fine tuning.
It has long been observed that financial systems seem to be subject to boom–bust dynamics. We have repeatedly seen credit and leverage build up over time in response to some initial impetus, only to generate excesses that ultimately unwind, sometimes painfully. One question we face is how to define and measure these cycles.