Systemic risk, the potential for shocks to spread throughout and destabilize the financial system, has become the central concern of financial market regulation. Any reform effort should bear in mind that systemic failures are nearly impossible to predict. To enable sustainable growth while preventing catastrophic losses in the increasingly complex financial system, reform should focus on innovative mechanisms that mitigate the potential domino effect of failed firms. If financial institutions will be permitted to fail, they must be able to fail safely.