The link between financial regulation and interest rates goes two ways. While a more prudent approach to spending and savings may have reduced equilibrium interest rates, an extended period of very low rates may in itself call for tighter regulation. In particular, such an environment may increase the risk of unsustainable increases in asset prices.
This may be the case if investors take on more risk to increase returns or if they become overly optimistic about further increases in asset prices, thereby fuelling an asset price bubble. This leaves an important role for appropriately designed macroprudential measures.