At the same time, the growing imbalances in the world economy became and continue to be a source of instability, in addition to spurring protectionist tendencies. It is perhaps time to honor some fundamental principles, such as the one noted in an IMF Pamphlet from 1992: “The philosophy of the Articles of Agreement is based on the superiority of free trade as the organizing principle of international economic interaction.” 4 Lessons from the crisis The joint, massive, and unprecedented policy responses that were put in place as the crisis unfolded surely deserve due credit. As Mr. Subramanian here at the Peterson Institute noted in the Financial Times in late December 2009: 5 “What is striking about the influence of economics is that similar policy responses in the fiscal and monetary areas, and non-responses in relation to competitive devaluations and protectionism, were crafted across the globe. They were evident in emerging-market economies and developing countries as much as in the industrial world; in red-blooded capitalist countries as well as in communist China and still-dirigiste India. If ever there was a Great Consensus, this was it.” A key lesson from the crisis is the need for multilateral cooperation and collective action. It relates to the framework for polices on prevention, resolution, reform and implementation. It also relates to the institutional set-up.
EU regulations due to take effect later this year will require credit rating agencies seeking to operate in Europe to register and be supervised by the proposed European Securities and Markets Authority (ESMA). Concurrently with the significant work to strengthen the resilience of the financial system, important changes are also being considered to improve the regulatory and supervisory framework. Of particular significance is the creation, proposed by the de Larosière Report, of the European Systemic Risk Board (ESRB), which will exercise macro-prudential supervision and monitor systemic concerns, and, at the micro-prudential level, of the European System of Financial Supervisors (ESFS). This consists of a network of national financial supervisors working with the new European Supervisory Authorities, namely the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority. 2  BIS Review 67/2010  Complementary proposals emerged from the G20 London Summit of April 2009, which launched a global plan for recovery and reform and mandated the FSB to ensure the consistent implementation of the G20 road-map. Ongoing work, which is expected to be completed in the coming months, includes an impact assessment of the BCBS capital and liquidity proposals; the development of tools to reduce the probability and impact of failure of systemically important institutions; measures to reduce the potential of OTC derivatives markets to act as channels of contagion; proposals to restart securitisation on a sound basis; and promoting the full national implementation of the FSB Principles and Standards on compensation.