Innovative macroprudential policy for financial stability

The 2007–2008 Global Financial Crisis (GFC) brought back into focus the issue of systemic financial instability and the regulation of financial activities at the macroeconomic level. Much work has been done in the decade following the crisis to determine the nature, conditions, and scope of macroprudential regulatory models with a view to strengthening the effectiveness of financial market regulation and supervision mechanisms in parallel with the microprudential regulatory practices that have been implemented for several decades. In the light of the GFC, the latter have proven to have limited capacity to ensure the systemic stability of financial markets. Attention is therefore turned to the possibility of considering innovative combinations of macroeconomic regulatory instruments and modalities that could reduce the occurrence and severity of major financial crises without hampering the dynamism of innovative financial markets. Macroprudential regulation comprises many elements, and the question of choosing the optimal combination of macroprudential policy instruments and their interaction is a critical issue with regard to these observations. In line with this, the main purpose of this chapter is to question whether the financial system is adequately protected from risks, more than 15 years after the GFC.