During the 2008 financial crisis, the failure of several large financial institutions required the action of governments to either allow these institutions to fail or save them. Regulators realised they needed a more uniform way to assess the risk of banks to prevent a similar crisis. New regulation includes a variety of ratios, stress tests and requirements.
Key learning objectives:
Understand the need for change in the regulatory system after 2008
The concept of bail-in and the role of creditors as loss bearers
New regulations, capital requirements and key ratios