Alexandre Lamfalussy and the Origins of the BIS Macro-Prudential Approach to Financial Stability

Abstract

Among the international policy institutions, the Bank for International Settlements (BIS) is known for its sensitivity to financial stability issues. Typical for the BIS is a macro-prudential approach. In this paper, it is argued that Alexandre Lamfalussy, who was at the BIS from 1976 to 1993, played a crucial role in shaping the BIS approach. Typical for Lamfalussy are a broad macroeconomic view and a focus on the systemically important institutions. In Lamfalussy's view, there is thus very much an overlap between the micro- and macro-prudential dimensions of financial stability. The main reasons for his sensitivity to financial fragility were: a Keynesian Weltanschauung (that a market economy is not sufficiently self-correcting), the emphasis of Dupriez (his teacher) on cycles, Lamfalussy's experience as a commercial banker, BIS involvement in financial stability issues, especially the Latin American debt crisis of 1982-83 and research on financial innovations.

Keywords: supervision, banking sector, Bank for International Settlements, Lamfalussy

JEL Classification: A11, B22, B32, E3, F02, G10, N10