Implementing a Macroprudential Framework: Blending Boldness and Realism

25 Pages Posted: 29 Jan 2013  

Claudio E. V. Borio

Bank for International Settlements (BIS) - Research and Policy Analysis

Abstract

There is now a broad consensus in the policy community that strengthening the macroprudential orientation of regulatory and supervisory frameworks is essential for the promotion of financial stability. The window of opportunity to put in place fully fledged macroprudential frameworks should not be missed. Meeting this challenge calls for a finely balanced blend of boldness and realism. Boldness is required to face the hard design questions head-on; realism to avoid overreach and to manage expectations. Policymakers should be as ambitious as possible, but no more. In all this, research has an important role to play in allowing the framework to grow at a pace commensurate with our knowledge. This speech considers how to strike the balance between boldness and realism in several aspects of the framework: in the criterion for judging its success; in how closely systemic risk should be tracked; in the mix between an aggregate and a sectoral approach; in that between rules and discretion; and in governance arrangements. It also highlights some key questions for research.

Comments on this paper can be found at:
http://ssrn.com/abstract=2208661

Keywords: macroprudential, microprudential, systemic risk, regulation and supervision

Suggested Citation

Borio, Claudio E. V., Implementing a Macroprudential Framework: Blending Boldness and Realism. Capitalism and Society, Vol. 6, Issue 1, Article 1, 2011. Available at SSRN: https://ssrn.com/abstract=2208643

Claudio E.V. Borio (Contact Author)

Bank for International Settlements (BIS) - Research and Policy Analysis ( email )

CH-4002 Basel, Basel-Stadt
Switzerland

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