The failure of the doctrine can possibly be explained by the much higher level of debt and leverage in the current crisis. 6. It is clear that there was inadequate understanding of systemic risks in the pre-crisis period and there was no framework to address them.
In my view, the most notable and novel feature of Basel III framework is creating a framework for dealing with systemic risks and consequently with financial stability issues. 7. Let me now briefly discuss how the pursuit of financial stability i.e. dealing with systemic risks, necessarily has a cost in terms of growth.