ABSTRACT
The governance challenge is that finance has increased its bargaining power vis-à-vis regulatory authorities, and that global competition sets limits as to how far one country can go in reining in its financial sector without losing valuable business abroad. Emerging economy banks were more insulated from the turmoil given their domestic focus, relatively low use of market funding, and generally higher regulatory buffers, the last reflecting in part the lessons of prior financial crises. While the financial crisis and the subsequent recession revealed major regulatory and strategic flaws in the traditional financial sector, the last decade has also seen the emergence of new digital actors with the potential to only disrupt conventional financial models, but also to undermine traditional financial governance. Emerging as the ink had barely dried on the last financial crisis in part due to creative product innovation with a disregard of risk fintech and cryptocurrencies represent new innovative initiatives that are resistant to governance.
