Handbook of Market Risk

Chapter Fourteen

Conclusion

Almost five years after the start of the credit crunch, the financial sector is now under more scrutinity than ever. In 2008 we were close to Armagedon. The banking system was saved from collapse by billions of taxpayer's money, which in turn led to anger that the public was having to bail out bankers, who were finally perceived as just unreasonably risk-taking, gambling, and greedy. Following this crisis, significant changes to the regulatory systems have been done with the objective to make financial institutions more robust in case of another systemic crisis. Parallel additional controls and a better risk governance have been implemented. Some regulators in Europe announced tougher restrictions on the bonuses in order to limit risk-taking. Some of these new regulations are still under discussion, and probably more will come. It is important to secure the financial markets from system risk, but we also have to make sure that new regulations will just stop this industry from functioning, especially in Europe. I see regulations as brakes for a car, but we just have to make sure that the brakes do stop the car completely.

In the last 20 years, the financial risk management has gained an important role for the companies and financial instruments as demonstrated in this book. Financial innovations have imposed new challenges for market participants and their superviors in the areas of systemic risk. The world of capital markets is very fast-moving, especially ...