The Basel Core Principles for Effective Banking Supervision were expedited and initiatives such as the IMF-World Bank Financial Sector Assessment Program (FSAP) took shape. The Basel II regulatory framework also saw the light of day. These international efforts were complemented by national initiatives at strengthening the supervisory architecture.
The financial crisis that began in 2007 and morphed into a full-blown catastrophe with the collapse of Lehmann Brothers in 2008 served as a rude awakening as to how piecemeal those efforts towards revamping the regulatory architecture had been.4 A microprudential approach to supervision coupled with information gaps and asymmetries limited the ability of supervisors to monitor risk exposures, risk transfers and threats to systemic stability.