Finally, and crucially, in the aftermath of the financial crisis, we are working with our colleagues in Washington, D.C., and at other agencies to help put the nation’s financial system on a firmer footing. Yet, much remains to be done and we are determined to keep at it. I recognize fully that there can be no return to pre-crisis business as usual – whether on the part of the financial sector or on the part of regulators like ourselves. All in all, there is a lot to keep my colleagues busy. 2  BIS central bankers’ speeches  National economic conditions Now, let me update you on national economic conditions. We stand here today several years after the worst financial crisis in modern times. The origins of the crisis are complex, but it had its roots in the bursting of a credit bubble that had grown to great size during the middle part of the last decade. Prior to the onset of the crisis, a combination of rapid financial innovation and imbalanced global economic integration resulted in a mispricing of risk worldwide. This was particularly extreme in certain markets such as U.S. housing and housing finance. This mispricing of risk led to a misallocation of resources and an excessive build-up of debt in many parts of the global economy. Many – though not all – U.S. households responded to the easy availability of credit and rising home prices by taking on more debt.
Although the market itself can manage most of the conflicts of interest, it may take some time before a common practice is established. Experience also shows that good practice and good ethics can be eroded rather quickly in certain market situations. This is where the supervisory authority can help to develop and maintain confidence  4  BIS Review 47/2004