William C Dudley: Some lessons from the crisis Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Institute of International Bankers Membership Luncheon, New York, 13 October 2009. *  *  *  Thank you for having me here to speak today. It is a real pleasure to have this opportunity to discuss the challenges ahead in making our banking and financial system more resilient and robust. We have learned a great deal over the past two years about our financial system and its vulnerabilities. The challenge ahead is to put these lessons to good use. Regulators and market participants failed to fully appreciate the degree to which the various aspects of our financial system are interconnected, and to foresee what those tight linkages would mean for market function when even one reasonably large institution – let alone many – became distressed. We also did not fully appreciate the strength of the amplifying mechanisms that were built into our financial system; the consequence of which was to exacerbate the boom on the way up and worsen the bust on the way down. Contributing to these pro-cyclical dynamics were inadequate incentives for firms to curb their risk-taking and to more effectively manage the risks they did face.
What the world will look like in 2050 will be partly shaped by the future of Europe; and the future of Europe depends on the decisions we take now. Of course, we always face the risk of failure when conducting far-reaching reforms. Yet we cannot afford another missed opportunity and we have to act swiftly without losing a longer term view. For the Euro area, for its citizens, 2016–2017 is the decisive time to act. 4  4  Interview of Robert Mundell by Laura Wallace, « Ahead of his time », Finance and Development, IMF, September 2006, vol 43, n° 3. BIS central bankers’ speeches  BIS central bankers’ speeches  5