Among the most important of these were two factors: first, the funding fragilities created by the shadow banking system; and second, the catastrophic collapse of liquidity caused by investors’ sudden doubts about the credit risk and marketability of previously “safe” assets, and about the standing of counterparties. The dumping of risky financial assets and indiscriminate cutting of funding caused asset return correlations to jump.
The reforms to the insurance legislation, which we propose to discuss with you today, will bring our regulatory framework closer in line with international standards and will promote a more transparent and reliable regulatory structure.