"The most powerful unelected Government officials"
Financial Regulators are at the core of the evolution of the financial ecosystem. They define the financial institutions' risk appetite and effectively decide on their profitability and their business mix.
They certainly bear some responsibility in the GFC by allowing certain activities to go unchecked, yet their governance has neither been challenged and/or neither evolved. Central banks are mandated to adjust interest rates to control inflation expectations but post-GFC their mandate has implicitly been expanded to control asset prices and risk premia by playing a major role within the Buy-side.
By extending unlimited liquidity to the Markets they have been criticized for bailing out Wall Street multiple times and at any cost while Main Street is struggling to make ends meet in the real economy: effectively privatizing the rewards while socializing the risks. While initially assessing the inflation shock post-Covid as temporary, their policies of the past 15 years have been checkmated and left no other choice for central banks but to engage into an aggressive interest rate hiking cycle: "Higher for Longer".
A profound debate about their mandate and their social function has opened as their responsibility and credibility are clearly engaged while politicians rely on them to keep the economic engine running.
In this section we explore their impact on the financial and macroeconomic ecosystems and how their role could evolve in the future under the social and economic pressure.
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