But having flagged some of the challenges before the banks, it is incumbent upon me that I flag certain challenges for regulators. We all know that: –  the financial system is growing to be highly complex and opaque – sometimes making it difficult to assess the extent of exposures and potential spillovers.
This opacity magnified the shock to confidence as the recent crisis unfolded. –  the financial system has a propensity to become over-leveraged and heavily interconnected, leading to massive deleveraging and easily available propagation channels, both domestically and globally. –  liquidity risks, both the funding risks incurred by institutions and the associated market liquidity risks of assets, are often much higher than recognized.