Because of such externalities, it is essential that macro prudential policy makers worry about the health and resilience of the financial system as a whole. It should be noted that such commonality in behaviour can be encouraged by regulators.
For instance, the use of mark-to-market valuation practices and value-at-risk methodologies, and the reliance on credit ratings can lead firms to behave in similar ways magnifying the impact of economic disturbances on markets. Remuneration practices that provide incentives for investors to hold similar portfolios can also have this effect.