ABSTRACT
Poor governance has been one of the major contributors to the global financial crisis. With better governance of and in the financial sector, the financial crisis might well have been avoided altogether and certainly could have been much milder in its impact. This is not simply a case of being wise after the event. These problems were widely discussed before the event, including by the present authors, but little action was taken. In this book, we explore not just what the contribution of poor governance was to the crisis and to its depth but also why it is often difficult to improve governance. This enables us to offer a positive critique of the measures that are being put in place in the light of the experience of the crisis and to suggest how they might plausibly be improved. Crises of the sort being experienced are low-probability but high-impact events. Until they are a reality, it is very difficult to persuade people to take the actions necessary to provide the balance between good crisis avoidance and management preparation efforts, on the one hand, and greater risk taking, on the other, that people think appropriate once they have seen what a bad crisis can be like. The Nordic and Asian countries learnt a lot from their crises in the 1990s but others did not. Even so, the messages for better governance by and large did not get through.
