How should regulators deal with uncertainty? Insights from the Precautionary Principle
UEA's Rupert Read and the Bank of England's Ian Webb and David Baumslag critique the complacency of current financial regulations and risk management strategies:
Whilst regulation may have become more stringent since the 2008 financial crisis the perspective of preventing said catastrophic events is still largely absent. Financial regulators have continued via greater constraints and various management tactics, but as the authors write- "regulators may be working at the limits of their ability to understand the nature and scope of risks in supervising complex financial institutions". Instead, the application of the Precuationary Principle would ensure greater care when considering the potential for unknowable catastrophic consequences.
You can read more on the Bank of England Blog