Lesson 7: economics is not physics A few months into the crisis, the Queen happened to be at the London School of Economics and asked a perfectly sensible question: “how come none of the economists saw the crisis coming”. The Queen’s question resonated with people around the world who felt that they had been let down by economics and economists.
Over the last decade, German banks have improved their resilience and built up capital. However, this capital is also counterbalanced by greater macroeconomic risk. The effects of risks on individual banks is something that supervisors keep a watchful eye on. However, an assessment of the overall risk situation needs to look at more than just individual participants or sectors in isolation.