As Stephen Cecchetti recently noted, “there should come a day when the Basel Committee’s list of globally systemically important banks, or G-SIBs, is blank”. 7 Lack of a systemic aspect There was clearly also a lack of a sufficient macro-prudential aspect to banking supervision and regulation prior to the crisis.
The fundamental problem is that banks themselves do not have an incentive to fully internalize the social cost stemming from their own contribution to system wide risks into their business decisions. 8 In the absence of substitutive regulatory and supervisory measures in the years preceding the crisis, systemic risks built up in the form of ever larger, more complex and more leveraged financial institutions.