The Seven Risks that Could Aggravate the Next Crisis
By Rob Blackwell
Individual rules put in place after the financial crisis have made some large banks safer, but the flood of new and complex rules is in notable cases making the overall system riskier while harming innovation, according to a provocative new paper by Federal Financial Analytics. The paper, released Wednesday, cites examples of how the federal response could impede growth as well as make the system more vulnerable in a future crisis and the results more severe. “There are so many alarming signs that risks are imminent and that the cumulative impact of the rules requires urgent attention,” said Karen Shaw Petrou, managing partner with Federal Financial Analytics, in an interview. “Taken together, these risks may pose systemic risks on their own.” Petrou argues that policymakers are too caught up in “pointing fingers” rather than examining the danger signs resulting from rules mandated by the Dodd-Frank Act, Basel III and other measures.