What is needed, I believe is not architecture, but implementing and enforcing the nuts and bolts of financial supervision. In both developing and developed nations, the key to a strong financial system is a strong, independent supervisory system. The recent crisis exposed weaknesses on many interrelated levels. Inadequate resources to equip staff and train supervisors Poor contract, property and insolvency legislation. In a securitized world, when default looms, power shifts from the creditor to the borrower.
Risk modeling has great limitations, particularly in the loss of liquidity.
The illusion of boundless liquidity is just that - an illusion. Marketability is not liquidity. International diversification fails to provide much protection. This information must be accompanied by adequate standards of transparency and disclosure, so that all market participants share this information. Supervisors and regulators should share concerns and information across borders so that they can assess trends, which might have disturbing implications for financial markets.