Hernández de Cos advocates for agile financial regulation review

Post-Great Financial Crisis (GFC) reforms have significantly strengthened the global banking system, enhancing its safety and resilience.

Risk-based Common Equity Tier 1 (CET1) ratios now stand at 14.3 percent, a marked increase from less than 10 percent in 2011.

Banks' equity as a percentage of total assets also rose from 3.5 percent to 6.1 percent.

Liquidity positions have improved, with high-quality liquid assets increasing by 55 percent between 2012 and 2025 to 21 percent.

Stable funding structures have also increased by almost 40 percent to around 56 percent of total exposures.

These improvements are directly linked to Basel III, which raised the resilience bar across banks.

Market-based measures of systemic risk have declined, indicating reduced vulnerability and interconnectedness within the financial system.

Too-big-to-fail reforms have also shown meaningful progress, with the funding advantage of global systemically important banks (G-SIBs) falling.

Policymakers must remain open to reviewing regulatory frameworks almost two decades after the GFC.

Any review should be open-minded, holistic across the entire financial system, and recognise financial stability as a global public good requiring cross-border cooperation.

This is crucial given the primary focus on banking post-crisis, with non-bank financial intermediaries (NBFIs) seeing less strengthening and potential risk shifts.

While some studies suggest stricter capital requirements may reduce short-term lending, aggregate credit supply has expanded.

The cost of capital for banks generally fell after Basel III adoption, indicating overall net benefits.