“Is the chicken now coming home to rooster?”, asked a senior bank executive at a recent conference on European bank regulations. After four years of an extraordinarily busy agenda of reforming financial regulations, Europe is now struggling with its 4.5 trillion euro question*: what prudential regulations of banks are necessary in order to avoid another financial meltdown? Will authorities succeed in designing a crisis-proof financial system? No. But it could make it safer by addressing the source of systemic instability rather than micro-managing the financial sector.