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Implementing a Macroprudential Framework: Blending Boldness and Realism


  • Borio Claudio

    (Bank for International Settlements)


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.

Suggested Citation

  • Borio Claudio, 2011. "Implementing a Macroprudential Framework: Blending Boldness and Realism," Capitalism and Society, De Gruyter, vol. 6(1), pages 1-25, August.
  • Handle: RePEc:bpj:capsoc:v:6:y:2011:i:1:n:1

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    References listed on IDEAS

    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters,in: This Time Is Different: Eight Centuries of Financial Folly Princeton University Press.
    2. Claudio Borio, 2003. "Towards a Macroprudential Framework for Financial Supervision and Regulation?," CESifo Economic Studies, CESifo, vol. 49(2), pages 181-215.
    3. Gerlach, Stefan & Peng, Wensheng, 2005. "Bank lending and property prices in Hong Kong," Journal of Banking & Finance, Elsevier, vol. 29(2), pages 461-481, February.
    4. Yener Altunbas & Leonardo Gambacorta & David Marques-Ibanez, 2010. "Does monetary policy affect bank risk-taking?," BIS Working Papers 298, Bank for International Settlements.
    5. Valerie Cerra & Sweta Chaman Saxena, 2008. "Growth Dynamics: The Myth of Economic Recovery," American Economic Review, American Economic Association, vol. 98(1), pages 439-457, March.
    6. Reinhart, Karmen & Rogoff, Kenneth, 2009. ""This time is different": panorama of eight centuries of financial crises," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 77-114, March.
    7. Helmut Elsinger & Alfred Lehar & Martin Summer, 2006. "Risk Assessment for Banking Systems," Management Science, INFORMS, vol. 52(9), pages 1301-1314, September.
    8. Rodrigo Alfaro & Mathias Drehmann, 2009. "Macro stress tests and crises: what can we learn?," BIS Quarterly Review, Bank for International Settlements, December.
    9. Nikola Tarashev & Claudio Borio & Kostas Tsatsaronis, 2009. "The systemic importance of financial institutions," BIS Quarterly Review, Bank for International Settlements, September.
    10. Claudio Borio & Ilhyock Shim, 2007. "What can (macro-)prudential policy do to support monetary policy?," BIS Working Papers 242, Bank for International Settlements.
    11. Piet Clement, 2010. "The term “macroprudential”: origins and evolution," BIS Quarterly Review, Bank for International Settlements, March.
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    Cited by:

    1. repec:eee:jimfin:v:81:y:2018:i:c:p:203-220 is not listed on IDEAS
    2. Altunbas, Yener & Binici, Mahir & Gambacorta, Leonardo, 2018. "Macroprudential policy and bank risk," Journal of International Money and Finance, Elsevier, vol. 81(C), pages 203-220.
    3. Popoyan, Lilit & Napoletano, Mauro & Roventini, Andrea, 2017. "Taming macroeconomic instability: Monetary and macro-prudential policy interactions in an agent-based model," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 117-140.
    4. Guillermo A. Calvo, 2012. "The Price Theory of Money, Prospero's Liquidity Trap, and Sudden Stop: Back to Basics and Back," NBER Working Papers 18285, National Bureau of Economic Research, Inc.
    5. Borio, Claudio & Drehmann, Mathias & Tsatsaronis, Kostas, 2014. "Stress-testing macro stress testing: Does it live up to expectations?," Journal of Financial Stability, Elsevier, vol. 12(C), pages 3-15.
    6. repec:eee:finsta:v:29:y:2017:i:c:p:92-105 is not listed on IDEAS
    7. Claudio Borio, 2013. "On Time, Stocks and Flows: Understanding the Global Macroeconomic Challenges," National Institute Economic Review, National Institute of Economic and Social Research, vol. 225(1), pages 3-13, August.
    8. Gersbach, Hans, 2013. "Bank capital and the optimal capital structure of an economy," European Economic Review, Elsevier, vol. 64(C), pages 241-255.
    9. repec:clh:resear:v:8:y:2015:i:34 is not listed on IDEAS
    10. Silva, Walmir & Kimura, Herbert & Sobreiro, Vinicius Amorim, 2017. "An analysis of the literature on systemic financial risk: A survey," Journal of Financial Stability, Elsevier, vol. 28(C), pages 91-114.
    11. repec:eee:ecmode:v:68:y:2018:i:c:p:41-50 is not listed on IDEAS

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