Lean macroprudentialism and the centrality of resolution: Why Europe's ex ante framework cannot deliver stability

This paper argues that the European macroprudential regime has evolved into a complex architecture of buffers, national discretion, and instrument-specific controls due to persistent doubts regarding the credibility of the EU bank resolution regime. Moreover, macroprudential controls are structurally constrained by the dynamics of financial innovation, particularly the rapid growth of non-bank financial intermediaries (NBFIs), which continually move risk outside the traditional regulatory perimeter. In such an environment, ex ante macroprudential tools can at best respond to the last innovation but can never anticipate the next one. Thus, macroprudential policy should be lean and focused. If political capital for a major reform is available, it should be directed towards strengthening the resolution regime, which is the only institutional mechanism capable of disciplining risk-taking ex ante and providing stability ex post.