Five years after the collapse of Lehman Brothers, the world still needs a systemic approach to deal with systemic risks and system failures. Unfortunately, there may be little hope of strengthening global financial governance as long as implementation and enforcement of rules remain at the national level.
HONG KONG – When the US investment bank Lehman Brothers collapsed five years ago, emerging-market economies did not hold many of the toxic financial assets – mainly American subprime mortgages – that fueled the subsequent global financial crisis. But they were deeply affected by the drop in world trade, which recorded a peak-to-trough decline of at least 15%, with trade finance also contracting sharply, owing to a shortage of dollar liquidity. Have policymakers responded appropriately since then?
HONG KONG – When the US investment bank Lehman Brothers collapsed five years ago, emerging-market economies did not hold many of the toxic financial assets – mainly American subprime mortgages – that fueled the subsequent global financial crisis. But they were deeply affected by the drop in world trade, which recorded a peak-to-trough decline of at least 15%, with trade finance also contracting sharply, owing to a shortage of dollar liquidity. Have policymakers responded appropriately since then?