policymakers demonstrate

Financial Regulation in Europe: Foundations and Challenges 505
better at measuring risk and designing regulatory tools to reduce the build-up
of systemic risk and manage it more effectively. Having said this, much of the
discussion has been dominated by the last crisis – as always: regulatory reforms
after a crisis are designed to prevent the last but not the next crisis. We have thus
become better at analyzing the known unknowns; this, however, leaves us with
the unknown unknowns, including financial innovation leading to new business
models and new structures in the financial system and thus new and future
sources of financial fragility. As the financial system develops, research and
analysis (both academic and within central banks and regulatory authorities)
have to adapt to the dynamic nature of the financial system.
Acknowledgements
We would like to thank Andrea Amato and Marco Forletta for excellent research
assistance. We are grateful to participants, especially Jean-Edouard Colliard
and Evren Ors, attending a workshop in Florence for useful comments and suggestions.
Notes
1. There has been an intense debate on the coordination between the provisions concerning
bail-in in the BRRD directive and those contained in the new state aid regulation.
On this matter, see Kerle (2014) and Micossi et al. (2014).
2. Other related surveys on the origins of financial crises are provided by Bhattacharya
and Thakor (1993), Gorton and Winton (2003), Allen and Gale (2007) (Chapter 3),
Freixas and Rochet (2008), Rochet (2008), Allen et al. (2009a) and Degryse et al.
(2009).
3. One can also refer to this as production, process and organizational innovation.
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