Towards a European macroprudential policy

Abstract

A key legacy of the financial crisis has been a universal recognition of the importance of systemic risk. As such, systemic risk is not a novel concept, but until the near-catastrophe of late 2008 few understood the scale of destruction that systemic propagation of instability and herd behaviour could wreak in the modern financial system. However, while there is now clarity on the importance of systemic risk, there is much less clarity on how to control it.