Abstract
The financial crisis which began in the summer of 2007 has its roots in the under-estimation of systemic risk, in turn due to the absence of a macroprudential approach to the design of financial regulation and macroeconomic policies, as well as the excessively optimistic judgment of the originate-to-distribute model of banking. The ongoing process of reform of the global financial system aims to correct these mistakes. After a brief overview of the challenges ahead, this paper focuses on issues regarding the regulatory treatment of liquidity risk, looking at them through the eyes of the liquidity insurance arrangement proposed in Perotti and Suarez (2009).
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