In our report, we paint a scenario of a financial crisis history that could be avoided, if we learn from the lessons of the sub-prime crisis. Our scenario is not a prediction. Our aim in describing it is to show that current efforts underway to create a better system should not be taken as an assurance that the system is now safe from future crises. The sub-prime crisis of 2007 will not be the last financial sector crisis.
Our purpose is not to promote defeatism, but a sense of urgency. Regulators should put less effort into holding the lid down on banks and more into addressing the financial market distortions that fuel the pressure under the lid. And bankers should use scenario analysis to take an honest look at the risks to which their strategies expose them and their institutions’ ability to manage them.
