. and to do that, we need to further improve the regulatory framework in the coming years. i will argue that the financial system is in much better shape than a decade ago, but important risks still remain. i will argue that international regulatory authorities firstly need to maintain strict micro - and macroprudential regulation ; secondly, must seek further improvements in policy implementation ; and thirdly, should adapt to risks shifted outside their perimeter. 2. causes of the crisis and policy responses let me briefly recall the financial, economic and policy circumstances which allowed the global financial crisis to develop. causes of the crisis in the decades before the crisis, the global financial system changed profoundly. this was the result of deregulation, increasing competitive pressures on banks and increasing financial globalization. these trends have led to a greater role for market finance and a stronger interconnectedness within the financial system. during the same period, the macroeconomic environment underwent important structural changes. this happened on the back of accelerating globalization, the emergence of new players like china, and technological progress. against this background, large global flows of savings and investments 1 see b. bernanke ( 2009 ). reflections on a year of crisis. speech at the federal reserve bank of kansas city's annual economic symposium, jackson hole, wyoming. 21 august. the same remarks were delivered at the brookings institution, on 15 september 2009. pushed down long - term interest rates, in the united states and other advanced economies. 2 accommodative monetary policies further allowed for financial risk - taking. it has been argued that the “ great moderation ” allowed a leverage build - up that ultimately threatened financial stability and hence macroeconomic stability. 3 in the regulatory policy sphere, a widespread trend towards deregulation loosened the reins on risk - taking in the financial sector. microprudential supervision was not well equipped to address this increased risk - taking. in addition, macroprudential orientation of regulatory policy addressing systemic risk was almost completely absent at that time. in this environment, misaligned incentives prompted widespread risk - taking in the financial system. in combination with high economic growth, important imbalances developed. when the crisis erupted, banks did not have sufficient capital to absorb losses and authorities were not adequately prepared to handle failing banks. the imbalances spread almost instantaneously across the global financial system, as a result of the interconnectedness of financial institutions and markets. these patterns are not specific to the global financial crisis, as

such analyses should be evidence rather than sentiment based, and focused on better rather than less regulation. the global financial crisis has also shown that international co - operation is key in developing effective regulatory policies. the global financial sector is closely integrated, and national or regional developments create external effects that directly and indirectly affect financial stability in other jurisdictions. 17 developing a common approach creates a level playing field between jurisdictions which prevents regulatory arbitrage. the post - crisis reform agenda, but also the creation of a single supervisory mechanism in europe are important examples of successful international cooperation after the crisis. 16 e. cerutti, s. claessens and l. laeven ( 2017 ) the use and effectiveness of macroprudential policies : new evidence. journal of financial stability. 17 for a discussion of how regulatory arbitrage results from the increasing international integration of banking systems, see o. jeanne and a. korinek ( 2014 ) macroprudential policy beyond banking regulation. financial stability review, banque de france, 18., empirical evidence on this type of regulatory arbitrage is reviewed in g. galati and r. moessner ( 2018 ) what do we know about the effectiveness of macroprudential policy. economica. unintended consequences the third question relates to unintended consequences of regulatory reforms. a main concern here is the potential of shifting risks outside the regulated sector as new rules come in. as charles goodhart forcefully argued, prudential policy faces a “ boundary problem ” : … effective regulation can penalize financial intermediaries within the regulated sector compared to those just outside, leading to substitution flows towards the unregulated. 18 for example, when it comes to what we now call non - bank financial intermediation ( formerly known as shadow banking ) the growth of total assets in recent years has been higher than in traditional banking. it is true that since the crisis, efforts by the g20 and the fsb have resulted in better insight into non - bank intermediation. yet there are still important questions about potential systemic risks originating from the unregulated sector and how these risks could interact with those emanating from the regulated sectors. 6. conclusion let me conclude. the global financial crisis was a sobering experience that presented an existential threat to financial stability. the potential disruptive effects to the financial sector and the economy at large called for exceptional measures. in those turbulent times, the monetary, regulatory and supervisory