Systemic Risk and Macroprudential Policy After the Global Financial Crisis

Abstract

The 2007–2009 Global Financial Crisis (GFC) exposed fundamental weaknesses in pre-crisis financial regulation: a microprudential focus on individual institution solvency that ignored systemic externalities, insufficient attention to interconnectedness and contagion risk, regulatory gaps for non-bank financial intermediaries (shadow banking), and inadequate capital buffers against tail risks. The post-crisis regulatory architecture—embodied in Basel III capital and liquidity requirements, the Dodd-Frank Act’s Financial Stability Oversight Council, and SIFI (Systemically Important Financial Institution) designation and enhanced supervision—represented the most significant overhaul of financial regulation since the New Deal. This paper reviews the economics of systemic risk, the regulatory reforms implemented after the GFC, the academic debate about whether post-crisis regulation has made the financial system more resilient or more fragile, and the emerging systemic risks from climate change, cryptocurrency, and non-bank financial intermediaries.