As many of you will know, the Lehman Brothers' (LB) collapse was one of the most tumultuous and dangerous events which precipitated the meltdown of the global financial crisis. The LB collapse is not only significant for the magnitude of it's effects, but also for the fact that large ratings agencies such as Moody's gave LB an "A " rating only a week before its sudden collapse which left employees jobless within a day with no prior warning.
Since then, one would have to question whether any significant and meaningful changes have been made to the financial system to prevent a repeat of the LB collapse. Despite increasing levels of regulation, derivative usage is still prevalent, which essentially validates the statement made by former chancellor Alistair Darling : " As long as people think they can make money out of nothing, it will happen again "
In my opinion, despite what appear to be major regulatory changes, most of the alterations made are from an architectural, and not a mechanical viewpoint. For example, the FSA has been replaced by the PRA / FCA, yet it is unclear exactly how this is supposed to help prevent crises of liquidity.
Furthermore, despite the Basel III agreement stating that banks should aim for a 7% capital ratio by 2019, a fierce debate has ensured regarding something known as the leverage ratio ; whereby banks were disallowed to judge which assets were inherently riskier than others. The way in which the debate regarding asset volatility still ensues shows not only the complexity of modern financial assets, but also , in my opinion, why they are such a fascinating subject to study.
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