At the same time, it needs to be recognised that regulation in itself can act to magnify cycles. In order to address the issue of procyclicality, regulators need to focus on: identifying factors that amplify cycles; improving and diversifying market risk management models; undertaking more rigorous stress testing; and adopt forward-looking procedures to capital calculations.
Fourth, the international financial architecture needs to be strengthened to address the challenges of the global economy of the 21st century. The crisis has exposed fundamental problems, not only in national regulatory systems affecting finance, competition and corporate governance, but also in the international institutions and arrangements created to ensure financial and economic stability.