In Section 3, I examine what we should learn from the Eurozone Crisis, and examine the current issues of regulatory reform from this perspective. I argue that we should not indulge ourselves in the wishful thinking of a quick return to “normality”. In advanced countries, we are likely to face severe and prolonged balance sheet adjustment under the unfavorable conditions of population ageing.
Bearing this in mind, I also argue that what is needed is appropriate sequencing of regulatory reform when banks are deleveraging, not leveraging. Finally, I will touch upon the cross-border issue raised by the Volcker Rule in the Dodd-Frank Act, which is another example of the unintended cross-border impact of financial regulation.