248 PA R T I I I Financial Institutions Systemic banking crises Episodes of nonsystemic banking crises No crises Insufficient information F I G U R E 10 - Banking Crises Throughout the World Since 1970 Source: Gerard Caprio and Daniela Klingebiel, Episodes of Systemic and Borderline Financial Crises mimeo, World Bank, October 1999 WH IT HE R FI NA NCI AL REG U LATI O N AF TE R TH E SU BPRI M E FI NA NCI AL CRI SI S? The recent subprime financial crisis has led to banking crises throughout the world, and it is too soon to tell how large the costs of rescuing the banks will be as a result of this episode (which is why they are not listed in Table 10-3) Given the size of the bailouts and the nationalization of so many financial institutions, the system of financial regulation will surely never be the same Here we can speculate on where financial regulation might be heading as a result of this crisis The financial innovations of subprime and Alt-A mortgages and structured credit products like collateralized debt obligations helped trigger the crisis Although these innovations have the positive potential for promoting the democratization of credit, that is, increasing the access of poorer members of society to credit, they went horribly wrong because of the agency problems of the originateto-distribute business model Future regulation will surely focus on limiting these agency problems to make the originate-to-distribute model and the financial system overall work better Eight types of regulation likely to be seen in the future are described below