Financial policymaking in the context of the known, the unknown and the unknowable

This article examines the challenge of financial policymaking from the perspectives of what is known, unknown and unknowable about the financial system. It focuses on policy challenges during the Great Recession and changes in regulations in response to lessons drawn from the global financial crisis. The article concludes that since many of the risks to the financial system are unknown and some are unknowable, regulators and supervisors need to place much greater emphasis on the resilience of the system. Rather than imposing increasingly prescriptive regulations, a wiser course may be to devise simpler rules that can be implemented and monitored more easily.