Financial crises are some of the largest peace-time negative shocks to hit market economies and our ability to use monetary policy in order to deal with them ‘ex-post’ would be impaired in a secular stagnation world. This makes the role of regulation in avoiding financial crises more important than ever.
For example, banks should check what Brexit might mean for covenants, or how it could affect the handling of margin calls. This is important advice for all companies – not just banks – that want to avoid a rude awakening after Brexit. And I believe Wolfgang Dörner will talk later about preparations that companies and financial institutions should make.