The definition of systemic importance has to be calibrated in a manner that it provides the right incentives for institutions which are large but not very interconnected or complex.
Policy responses Broadly two kinds of policy responses are being debated: (i) reducing the probability and impact of failure of a systemically important institution and (ii) making the financial system better able to deal with such a failure. The single most important element in respect of both the above approaches would be containment of interconnectedness in the financial system.