The efforts to reform the international financial system by the international community have aimed to address the broad range of flaws and weaknesses that has contributed to this recent crisis and to restore confidence in the integrity of the global financial system. At the core of this reform agenda is the development of a new financial regulatory framework that would be more effective and that is premised on a greater emphasis on ethics, fairness, and accountability and that promotes global economic, social and environmental sustainability. It also needs to be anchored on a balance of supporting growth while maintaining financial stability, and one that is founded on greater international coordination of regulatory approaches and supervisory oversight with a crisis management framework that will reduce systemic risk and the severity of any such future financial crises. These reforms include measures to raise the quality and level of capital held by banking institutions, strengthening the liquidity risk requirements and management, implementing  BIS Review 70/2010  1  forward-looking provisioning standards, and aligning compensation practices with long term performance. Further measures also include the improvement in transparency and strengthening of the supervisory frameworks and arrangements for dealing with cross-border oversight on financial groups that operate beyond domestic shores. This has also been reinforced by the strengthening of macro-prudential regulation. The crisis had demonstrated that the collective behaviours of banking institutions and other highly leveraged institutions had contributed to the material build-up of risks in the financial system which ultimately in turn undermined financial stability.

Banks were stronger. In the UK they were three times better capitalized than at end 2008. And to be clear –very significant government support and central bank interventions were required. I’ll come back to this later. But there is one other reason for the missing panic that I want to focus in on. After the 2008 global financial crisis, the G20 put in place reforms designed to make the global financial system simpler - to untangle the spaghetti bowl of bilateral derivatives trades that had fed the 2008 panic.2 They incentivised - and for many products mandated - central clearing of derivative trades. Global clearing has as a result, grown significantly in the past decade. Today, about 60% of credit default swaps are cleared, as well as 80% of interest rate contracts, up from about 10% and 40% respectively in 2008.3  This brought greater stability to derivative markets by ensuring that if a major financial institution were to collapse, you needn’t worry about a domino effect – with the failing firm’s derivatives contracts potentially threatening the viability of any number of other firms.4 1  Ben Bernanke, Op-Ed at Brookings Institution, 13 September 2018 G20 Leaders’ Statement Pittsburgh Summit, September 2009. 3 Bank of International Settlements Statistical Release, November 2020 4 Although it’s not my focus today, reforms to bilateral derivatives trading have also helped to reduce the chance that bilateral contracts fuel a panic.