Yet none was subject to a statutory ex ante framework for prudential regulation. Solving the boundary problem alone will not counterbalance contemporary sources of systemic risk. The rapid development of market-based financial intermediation has also highlighted the need for a macroprudential regulatory approach to complement more conventional prudential supervision. Of course, systemic risk and the associated problem of too-big-to-fail have long concerned financial regulators.
Traditionally, though, systemic risk was thought to rest in the potential for the failure of one bank to produce depositor panic that infected other, solvent banks, or for the failure of one large bank to bring down counterparties that were dependent upon payments from the first institution. Federal deposit insurance addressed the first source of systemic risk.