Uncertainty rippled through the market, spreading fear about the solvency of other banks and impairing the functioning of markets. This experience highlighted the interconnectedness within markets and how the failure of one institution can pose a systemic risk that threatens the entire financial system.
Under the G-20 reforms aimed at reducing systemic risk, countries have agreed to report all transactions to trade repositories and to centrally clear all standardized contracts. Again, much progress has been made on improving the reporting and central clearing of transactions. 15 The challenge ahead is to ensure that the rules for on-the-ground implementation of some of these reforms are consistent across jurisdictions.