Macroprudential regulation: A contradiction in its own terms

Against the background of the 2008 global financial crisis, this article examines the re-emergence of an emboldened concept of macroprudential regulation, an approach now strongly advocated by many governments and international financial institutions across the globe. The article argues, however, that macroprudential regulation is characterised by major theoretical contradictions and practical difficulties that over the longer term mean that it cannot offer the desired insurance policy against future global financial crises. Although acknowledging the significance and genuine difficulties arising from more technical areas, such as complexity, systemicity and risk, the article's main emphasis is on the politics of regulation and regulatory cultures. This is partly because of the critical role these hitherto overlooked factors played in the run up to the financial crisis, but also because if macroprudential regulation is to achieve its stated stability and growth objectives, it will only do so through unprecedented levels of intervention, thereby elevating the stakes and bringing the politics of regulation centre-stage.