But we must not lose sight of the simple fact that the very same financial innovations that now propagate turmoil also carry the potential of tremendous benefits in terms of lower cost of finance and better diversification of risks. The challenge is to find the right balance of risks and rewards. We need better incentive structures. We need better performance from rating agencies.
The discussions in Washington were dominated by the complex challenges facing the global economy including: economic and macro-financial implications of geopolitical fragmentation; heightened financial stability risks in the wake of recent market turbulence with focus on both banks and non-banks; policy making in a high interest rate environment; and how to tackle soaring public debt.