Reconceiving Resilience: A New Guiding Principle for Financial Regulation?

Mary Dowell-Jones & Ross Buckley | January 1, 2017

Most postcrisis financial regulation is expressed to be in the pursuit of increasing the resilience of the global financial system. “Resilience” features in the formal title of the Basel III reforms to bank capital adequacy rules. This article explores the meaning of resilience from social-ecological systems science and applies it to international finance. We conclude that postcrisis financial regulation has in fact sought to build a stronger, more robust system, not a more resilient one. The regulation imposed on global systemically important financial institutions is designed to make these institutions too strong to fail, not give them the capacity to reorganize themselves, or transition to a new equilibrium, in the face of major external shocks. This article challenges the fundamental thinking behind seven years of postcrisis financial regulation and suggests we need far more rigorous research into what a truly resilient international financial system would look like and how it would be regulated.