However, the resistance to surrendering national sovereignty on banking supervision proved too strong in an environment where serious banking crises were not expected and – even more importantly – the cross-border effects of banking problems were seriously underestimated. However, the crisis proved that the fragility of banks can be just as detrimental to the functioning of a monetary union as excessive government deficits.
Supervisors of firms that offer prime brokerage services, particularly supervisors of new entrants, must ensure that the firms are fully aware of the risks involved and effectively manage them. The proliferation of new financial products also poses risk-management challenges, including challenges on the operational side.