Ten years on from the credit crunch that marked the start of the greatest financial crisis in history, two important questions arise. After extensive remedial work, is the global financial system now fit for purpose? And are the advanced economies vulnerable to a further crisis of comparable magnitude?

With the US and UK economies showing continuing, if unexciting, growth and the eurozone finally enjoying a synchronised upturn, the banks appear no longer to be holding back recovery. In its recent monetary policy report, the Federal Reserve stated that vulnerabilities in the US financial system remained moderate. That view is echoed by central bankers in Europe and Japan. Yet the underlying picture is complicated.

The US banking system is notably less weak than its European counterpart. That is because American policymakers learnt from the earlier Japanese experience of boom and bust. Among the lessons were the importance of timely recognition of losses after the crisis, rigorous stress testing and the need for carefully judged strengthening of bank balance sheets, while maintaining a flow of credit to the real economy.