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Populists have jumped on the chance to capitalize on disillusionment and lead a movement for isolationism. How far will this go, Michel Longhini asks in his essay for finews.first. 

finews.first is a forum for renowned authors specialized on economic and financial topics. The texts are published in both German and English. The publishers of finews.com are responsible for the selection.

This autumn will mark the tenth anniversary of the most spectacular bankruptcy of all times. On 15 September, 2008, banking heavyweight Lehman Brothers, knocked sideways by the bursting of the sub-prime mortgage bubble a year earlier, declared itself insolvent with $613 billion worth of debt.

This whipped up a storm that raged through Wall Street, spreading mistrust and toppling other large institutions. Stock markets crashed, the credit market dried up and the real economy suffocated.

The gangrene then spread to the eurozone – causing several member states to totter under the weight of public debt – and eventually to the rest of the world. Ben Bernanke, the Federal Reserve Chairman at the time, has even said: «September and October of 2008 was the worst financial crisis in global history, including the Great Depression».

«The world of finance has undeniably been completely reshaped by regulatory overhaul»

With the «too big to fail» dogma and financial market self-regulation in tatters, authorities – in full interventionist mode – mobilized to contain the blaze. It became abundantly clear that the only way the worldwide financial system could pull through this crisis caused by its own excesses would be by drastically revising how it functioned and was regulated.

So in London in April 2009, and the following September in Pittsburgh, the G20 agreed on the need to reform the financial system and increase international cooperation. That was ten years ago. While some well-meant plans never came to fruition, the world of finance has undeniably been completely reshaped by the regulatory overhaul.

This reform has been twofold: on the one hand, supervision of financial institutions has been strengthened in order to contain the spread of bad debt and risk of bankruptcy. On the other hand, transparency and protection has been improved for investors, in particular for retail clients, the collateral victims of the crisis.

«Add the worldwide push towards tax transparency»

The resulting Basel III Accords, adopted at the end of 2010, impose stricter liquidity requirements on banks and prudential rules to improve the quality of their capital.