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AmericasSeptember 1 2011

Agustin Carstens: central banks hold the key to financial stability

Agustín Carstens suggests that central banks must play a more pivotal role in order to prevent such a widespread and deep-rooted crisis hitting again.
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Agustin Carstens: central banks hold the key to financial stability

We are still immersed in the most severe and extensive international financial crisis since the Second World War. As is the case with most financial crises, the current crisis was preceded by an economic bonanza, characterised by the growth of household and corporate leverage and increasing imbalances between savings and consumption. However, the severity of the crisis and the magnitude of the losses are explained by the fact that this time the crisis originated in the most developed countries.

Financial deregulation and innovation enabled the crisis to spread rapidly at a global level. The increased complexity of financial operations and the excessive fragmentation of entities with regulatory powers led to a lack of proper oversight and a serious underestimation of the risks assumed by economic agents.

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