How to prevent financial crisis in the future?

This article is inspired from Federal Reserve Chairman Ben Bernanke speeches.

We must have a strategy that regulates the financial system as a whole, in a holistic way, not just its individual components. The strong regulation and supervision of banking institutions, although necessary for reducing systemic risk, are not sufficient by themselves to achieve this global aim.

There are four key proposals from Federal Reserve to reform the financial system. That would prevent a similar crisis happening in the future.

1. The approach to the problem of financial institutions or business that are deemed too big--too interconnected--to fail should have a bunch of solutions.
2. The financial infrastructure overhaul: the systems, rules, and conventions that govern trading, payment, clearing, and settlement in financial markets--should perform well under stress.
3. The policies and accounting rules should change so to ensure that do not overly magnify the ups and downs in the financial system and the economy.
4. The control over financial activities, the creation of an authority specifically charged with monitoring and addressing systemic risks would help protect the system from financial crises like the one we are currently experiencing.

In light of the global nature of financial institutions and markets, the reform of financial regulation and supervision should be coordinated internationally to the greatest extent possible.

The economists point of view is: The financial crises will continue to occur, as they have around the world for literally hundreds of years. Even with the sorts of actions it is unrealistic to hope that financial crises can be entirely eliminated.

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