The Great Financial Crisis of 2007-2010 exposed the existence of significant imperfections in the financial regulatory framework that encouraged excessive risk-taking and increased system vulnerabilities. The resulting high cost of the crisis in terms of lost aggregate income and wealth, and increased unemployment has reinforced the need to improve financial stability within and across countries via changes in traditional microprudential regulation, as well as the introduction of new macroprudential regulations. Amongst the questions raised are:

• What are the challenges to prudential regulation?
• How has the regulatory environment changed in recent years?
• How do the reforms interplay with market discipline, risk-taking incentives and risk management arrangements?
• Does the new regulatory framework allow for the introduction of financial innovation, and the associated benefits, without increasing disruptive financial risk?