The financial system is not stable in itself, but can be made resilient: that is the message of Aerdt Houben’s inaugural lecture.
The financial system has gone through some rocky times over the past few years. After the financial crisis broke out in 2008, the system has been held up through all kinds of public interventions. This helped prevent an economic collapse, but at a high cost. Public finances have been weakened and the economic dynamics have slowed down. Trust in the financial system has also been severely affected, putting pressure on financial institutions an diminishing the effectiveness of incentive policies.
Houben argues that the financial system isn’t stable in itself, and that systemic risk cannot be banished completely. However, systemic risk can be reduced considerably, by counterbalancing risks by creating financial structures that have a degree of resilience.
A.C.F.J. Houben, professor of Financial Policies, Institutions and Markets and Division Director of Financial Markets at De Nederlandsche Bank: Nieuwe instrumenten voor een weerbaar financieel systeem. #vertrouwenonderbouwen.