20 - Twin Peaks, Macroprudential Regulation and Systemic Financial Stability

Summary

As the Global Financial Crisis has demonstrated, any complex system is vulnerable to fragility without purpose and vigilance. The tentacles of the finance industry traverse state boundaries. They create moral and economic hazards as well as opportunities. Each poses legitimacy and authority implications. Failure to address those threats have contributed to a populist turn, which poses the risk of further policy uncertainty and instability. Responding to this crisis through resilience as either metaphor or organising framework is, however, problematic. This chapter argues that notwithstanding its increasing usage by international bodies such as the G20, resilience is not a neutral concept. Privileging resilience as an end in itself may prove counterproductive unless underpinned by a normative reset of the purpose of the corporation and the market, and the duties and responsibilities each owe to society. It concludes that without clear definition of purpose, and accountability, regulatory structural form is irrelevant, as demonstrated by the failure and ineffectiveness of the Twin Peaks model in Australia.