The 2008 financial collapse: Lessons for engineering failure

The banking system, just like engineering systems, fails from time to time. As a consequence, again like engineering systems, it has imposed on it a risk regulatory system. While the ‘technology’ being regulated is clearly very different, it is shown that the wider incentives to take risks and the consequent problems for risk regulation are very similar to real world engineering. The evolution of the crisis is described drawing on published inquiries and the parallels at each stage of the crisis to engineering systems failures are identified. The conclusion is drawn that the real failure was not the regulators but their oversight system – the meta-regulation framework. Conclusions are drawn for the function of risk regulation in engineering especially as applied to complex systems.