Volume

104

Issue

9

Abstract

The recession that followed the financial crisis of 2007-2008 illustrated just how important financial stability is: when the financial system fails, it results in credit contractions that can cause seismic problems for the economy at large. Because financial institutions lack the incentives, information and tools to reduce the amount of risk in the financial system as a whole, the vital task of overseeing and regulating for financial stability must necessarily be carried out by a public body.

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