The global financial crisis has had a devastating impact on major financial markets, undermining the solvency of firms, disrupting trading liquidity, and forcing a rethinking of prudential regulation. The crisis has made these markets candidates for radical regulatory change. Whereas the regulatory focus had been on the soundness of individual banks, the crisis has shown the need to deal with the financial system as a whole, and such a systemic approach requires the proper regulation of the markets and of the transactions that reflect the interconnections between banks and other financial firms.
The change in approach is reflected in proposed regulatory standards from the Financial Stability Board, the International Organization of Securities Commissions, and such private organizations as the Group of 30 and the Institute of International Finance. Recent proposals from the U.S. Treasury Department reflect similarly fundamental changes in the approach to financial market regulations. The proposals must still be drafted into legislation and approved by the U.S. Congress. But if legislators make few major changes, the Treasury proposals would become the first major overhaul of the U.S. financial system since the New Deal policies during the administration of President Franklin D. Roosevelt, when the world also faced a monumental economic crisis.