Since macro factors trigger systemic crises, macro-prudential supervision is a must. Macro-prudential supervision should be institutionalised and closely co-ordinated with micro supervision. Both should operate under a strong, common authority, particularly bearing in mind that ‘intellectuals’ (macro) and ‘policemen’ (micro) make uneasy bedfellows.
Tough supervision can help plug any regulatory gaps, but weak oversight can undermine even the soundest of regulations. The real-world evidence is
- Demonetisation backer becomes new RBI governor
- Kohn ‘deeply’ worried Fed might not have support to fight next crisis
- Central banks turn to visual communication in 2018
- Indian governor resigns after conflict with government
- Book notes: Macroprudential policy and practice, edited by Paul Mizen, Margarita Rubio and Philip Turner