The European Central Bank, for example, defines systemic risks as “risk that financial instability becomes so widespread that it impairs the functioning of a financial system to the point where economic growth and welfare suffer materially” 1 Over a decade ago, a G10 Report on Consolidation in the Financial Sector (2001) suggested a working definition, which arguably remains relevant even today: “Systemic financial risk is the risk that an event will trigger a loss of economic value or confidence in, and attendant increases in uncertainly about, a substantial portion of the financial system that is serious enough to quite probably have significant adverse effects on the real economy.” More recently, following the work of the IMF, FSB and BIS for the G20 2, systemic risk has been defined as “a risk of disruption to financial services that is caused by an impairment of  1  European Central Bank Financial Stability Report, June 2009  2  Guidance to assess the systemic importance of financial institutions, markets and instruments: initial considerations, October 2009.
This should help prevent the recurrence of similar episodes of market excesses and corrections in the future, with disruptive effects on the real economy, and it should help ensure that the financial system is dynamically stable and resilient to shocks. III.