Dealing with Crises in a Globalized World: Challenges and Solutions

A year has already passed since the peak of the worst financial crisis the world has experienced since the Great Depression of the 1930s. This extreme episode of financial instability has led to a severe and truly globalized economic downturn, and has highlighted the worldwide devastation that can result from a disturbance in just one area of the world with a highly interconnected financial system. The emerging signs of recovery are welcome, though unusually high uncertainty persists. The crisis has revealed a number of weaknesses in the global architecture of financial regulation and supervision, as well as gaps in the toolkit available to policymakers for crisis management. An intense discussion on dealing with future crises is essential, and it is reassuring to see that it is taking place in various international forums. Against this background, I would like to thank the organizers of this conference for their invitation to participate in this panel on challenges and solutions for dealing with crises in a globalized world. I will use this opportunity to share with you some reflections on three areas where I believe progress is needed for promoting financial stability at the global level: international cooperation and convergence, simplicity in regulation, and the role of central banks in promoting financial stability. The views I express are my own and do not necessarily reflect the views of my colleagues on the Governing Council of the European Central Bank…