For these reasons, financial stability may be seen as a “public good” which requires adequate regulation. Regulators need to tread a careful path between controls that ensure the stability of the financial system and over-bearing regulation, which would hinder competition and efficiency. The new regulatory reform and the macro-prudential oversight now in place constitute an unprecedented achievement.
At the same time, key challenges remain, in particular regarding the interaction between macro-prudential and micro-prudential authorities, especially against a background of growing inter-connectedness of financial markets and the sovereign debt crisis.