Before I expound on the revamped approach to regulation and supervision in the post crisis world, let me step back a little and briefly touch upon the genesis of crisis. This not only helps in putting things in perspective, but as we deliberate on the reasons underlying the crisis, the solutions would automatically flow. The genesis Several factors were responsible for the crisis.
However, at the core of the crisis was the inadequate understanding and measurement of risks and funding of assets with shorter term liabilities on a large scale. There was aggressive easing of monetary policy in the US after the bursting of dotcom bubble leading to very low interest rates.