Paul Tucker, chair of the Systemic Risk Council and former deputy governor of the Bank of England, joins Mark Sobel, US chairman of OMFIF, to discuss the implications of coronavirus for the world economy. Since the 2008 financial crisis, much has been done to strengthen banks. But in recent years, the financial system has seen a concerning build-up of leverage and interconnectedness, especially in non-banks. Inadequate margining requirements have aggravated the liquidity shocks from the crisis, forcing central banks into even more dramatic action than otherwise would have been entailed. There will clearly be a need for post-mortems and reforms.
Paul discusses the blurring of fiscal and monetary policies, how these interactions will raise questions about democratic accountability, and how fiscal and monetary authorities should organise themselves. International co-operation is insufficient, particularly in comparison with the 2008 crisis. It is unfortunate in this regard that US authorities so heavily framed the country post-global financial crisis in terms of the Dodd–Frank Wall Street Reform and Consumer Protection Act, rather than acknowledging and embracing more firmly the international regulatory reform dimension.