"This crisis was not a black swan"
7 March 20
11, Fernando Montes-Negret spoke about the multiple crises and phases in the period of 2007 – 2010 at a CASE Policy Research Seminar. He explained that banks need good governance in order to prevent and good supervision in order to detect crises in advance. According to him the crisis was predictable, however “the form that it took was much more than someone could have expected”.
In his presentation “The 2007-2010 Financial Crises (plural): Symptoms, Causes & Remedies” Mr. Montes-Negret, Sr. Financial Sector Expert at International Monetary Fund, explained the causes of the crises and addressed the issue of systemic risk drivers: leverage, liquidity, linkages and losses. In order to reduce the banks’ leverage, Mr. Montes-Negret discussed two options; increasing the banks’ capital and reducing the banks’ assets. Whereas more capital does not decrease the chances of a crisis it might reduce costs, therefore, “less leverage with more capital must be part of the solution”.
According to Mr. Montes-Negret substantial challenges are ahead, the global financial system needs to be restored. He points out that the Banks have to adjust, “there will be more consolidation and there will be less need of branches” and that the on-site supervision has to be strengthened.
The views expressed herein are those of the author and should not be attributed to the IMF.
Video of the CASE Policy Research Seminar
