ProdukHukum BankIndonesia

Large Complex Financial Institutions;

Too Big to Manage?

Too Big to Regulate?

Historical S&P 500 movement

The US subprime mortgage crisis is the latest of

many financial crises

1000 1200 1400

1600 2000 - 2002: _{9-11 attack,}

dotcom crash, Enron 1997 -1998:

Asian crisis (limited impact on

the US economy)

3

Source: Bloomberg, US BEA

0 mortgage crisis, global economic

recession 1979 – 1980:

US economic dependence on debt

Banks’ market cap – big change in 18 months

“The far bigger failure – shared by bankers,

regulators, central banks, finance ministers and

academics across the world – was the failure to

identify that the whole system was fraught with

market wide systemic risk….”

The need for improvement

“We failed to realize that there was an increase in

total system risk to which financial regulators

overall - authorities and central banks and fiscal

authorities - needed to respond.”

Regulatory rumble – The Economist