Getting Ahead of the Risk Curve

In an acknowledgement that the problems that led to the financial crisis of 2008 have not been fully resolved, the Bank for International Settlements ("BIS") in Basel, Switzerland is seeking to address a return of excessive risk-taking in meetings this weekend with top financial leaders from around the world.  The Financial Times reported yesterday that the current low rate environment coupled with ample liquidity has set the stage for another potential crisis.  Here is what they had to say.

The Bank for International Settlements will gather top central bankers and financiers for a meeting in Basel this weekend amid rising concern about a resurgence of the “excessive risk-taking” that sparked the financial crisis.  In its invitation, the BIS cited concerns that “financial firms are returning to the aggressive behaviour that prevailed during the pre-crisis period”.  The meeting comes at a moment of intense uncertainty, with the global economy’s tentative recovery shadowed by “the overhang of private-sector debt and rapidly rising public debt”, and high unemployment.

It is a good sign that the BIS and others are looking to get ahead of the risk curve.  What remains to be seen is the reaction from the leadership of major financial institutions and the resulting behavior within the markets.