Ten years ago, the global financial and economic crisis began. In 2007, the hedge fund New Century Financial as well as the banks IKB Deutsche Industriebank and Northern Rock were the first financial institutions and hedge funds to run into difficulties as a result of having engaged in ill-fated speculations in the US real estate market. What at first appeared to be a few individual cases quickly snowballed into one of the worst global economic and financial crises since the 1930s. As a result, in 2009, output plummeted by just under 4% among G7 countries, and even somewhat more so in the euro area. The situation could have been much worse had it not been for the international community of states introducing several emergency packages to support the economic and financial system – a move that had previously been inconceivable. However, the financial crisis marked not only the start of bank bailouts and economic stimulus packages. It was also the dawn of a global regulatory agenda which was agreed upon by the G20 heads of state and government at the summits in Washington, London and Pittsburgh in 2008 and 2009. The promise was to "lay the foundation to prevent such a crisis from happening again." This presentation outlines the international regulatory process from the moment decisions are taken by the G20 up to their implementation in the European Union. It provides an overview of the current regulatory agenda and explores the question of whether the financial system has since become more stable, or whether more radical steps are necessary in order to make the financial system crisis proof in the long term – for example by stripping banks of their power to create money. In conclusion, it cautions against overestimating central banks’ means of exercising control, while acknowledging that flexible money creation and loan origination on the part of private banks makes a positive contribution to stabilizing an economy.
Carl-Ludwig Thiele, Deutsche Bundesbank, Frankfurt am Main