As Paul Romer, a Stanford Economist, once said, ‘A crisis is a terrible thing to waste’. Thankfully, lessons from the GFC were not wasted. Central banks and financial regulators made great strides in building a more stable and resilient financial system. The regulatory reforms by the BCBS under Basel III regime not only refined the existing rules but also introduced wideranging measures which were earlier missing or inadequate. Thanks to these efforts, the old fault lines have been largely fixed. Capital adequacy regime has been enhanced, with higher and better quality capital. Additional capital conservation buffer and countercyclical capital buffer requirements have also been put in place to help banks maintain additional cushion and limit the buildup of systemic risk. Likewise, leverage ratio has been phased in as a backstop to CAR. On the liquidity front, Liquidity Coverage Ratio and Net Stable Funding Ratio have further strengthened banks’ capacity to withstand liquidity stress and to make their funding structure more stable. To address structural dimension of systemic risk, capital charge for SIFIs has been added, recovery and resolution regimes have been strengthened and safety nets have been improved. Of course, this list is not exhaustive. While the world has not seen a crisis similar to GFC to determine if these reforms have made the financial system resilient enough, there is sufficient evidence to suggest that our banks are considerably more stable than a decade ago.
This is true for both cyber threats and climate change. A feature common to these risks is their wider impact through multiple entry points. Hence, the key to address both lies in sharing information and strengthening cooperation. If we are grappling with risks that transcend sectoral and national boundaries, so should our response. Thank you for your attention. 11/12/2019  Central Bank of Kuwait - Public ‫ عام‬- ‫بنك الكويت المركزي‬