Banks are once again being compensated for their basic businesses of providing liquidity and credit. Interestingly, despite the fall in measured volatility, industry VaR, while down from the peak earlier this year, is still above pre-Lehman levels. What is perhaps less evident is that these returns are largely the product of public policy.
In this context, I would like to stress two issues: •  First, we need to reform the financial market architecture to make markets more resilient and less prone to speculative exuberance. In order to achieve this, we have to use the current political momentum. •  Second, credible exit strategies will be needed at the right moment all around the globe.