A question I did not get to ask Roger Ferguson:
You call for four lines of defense in risk management:
- Regulators who demand adequate capital and proper marking-to-market
- Boards that demand management focus on risk-management
- Management that takes a long-term view and looks beyond the next crisis
- Management that promotes a culture of trust, honesty, and open reporting
But we have always been calling for these four lines of defense since the days of Berle and Means, if not before, and it always fails.
So why not, instead of calling once more for better multi-level corporate governance as far as risk management is concerned, simply declare defeat, and turn instead to requiring very tight caps on leverage with instant liquidation for a company that breaches them?