First, progress must continue on the “resolution” of central counterparties – their treatment in the event of difficulties –, as they have become systemically more important with compulsory centralised clearing for derivative instruments. Above all, we must ensure a balance between financing channels. All discussions on the shadow banking system must continue in order to take account of the risks that may have moved into this sector as a result of the ramping up of requirements in the regulated sector, and for banks and insurers in particular. It has been estimated that the segments that may pose financial stability risks represented a total of USD 34 trillion.14 The priority has now shifted from the solvency of banks, which has improved substantially, to the liquidity of the shadow banking sector, particularly funds and asset management companies that are exposed to the risks of sudden panic-driven runs. Lastly, progress is required on FinTechs and above all on the major digital platforms and businesses, which, if they carry out financial activities, will have to comply with similar regulations sooner or later. 3) The third challenge is evaluation. Evaluation is essential to the credibility of the financial reforms that have been adopted worldwide, and to this end, the G20 adopted a postimplementation evaluation framework this summer. This framework should allow us to determine whether the reforms have actually achieved their desired results, without any unexpected, adverse effects, and to make adjustments if this is not the case.
But undoubtedly, finance without rules could be the ruin of the economy. To be sure, financial regulation is necessary particularly because financial crises often have considerable economic and social costs, with serious and lasting repercussions. A study by Laeven and Valencia 8 in 2013, which considers 147 banking crises between 1970 and 2011, estimates the median output loss between the peak of activity before the crisis and the three years after at around 23% of GDP, and the median increase in public debt over the same period at 12% of GDP, while total government bailout spending amounts to almost 7 percentage points of GDP. Moreover, beyond the immediate effects, financial crises reduce the economy’s longterm potential: companies cut back on their R&D, capital and infrastructure investment, which results in a decline in productivity and a slowdown in technological progress. The 2007–2009 crisis is unfortunately an illustration of this; it was the worst crisis since that of the 1930s. The financial imbalances generated by the bursting of the subprime bubble in the United States spread rapidly to the global economy. The crisis affected both the level and trend of GDP, leading to a permanent loss in wealth. Cumulative GDP losses compared to the pre-crisis trend are estimated at a quarter of global GDP. 9 In a number of countries, in particular in southern Europe, GDP has still not returned to its pre-crisis level. II.