Pay more attention to the stability of the financial system, not only risk of the constituent parts. Remember, two banks with the same failure probability but different size present the same risk to their depositors but different risks to the system. Macro-prudential data is most likely to give better warning to policymakers of a build-up of financial imbalances. 2.
Take away the punch bowl just when the party gets going. We have learned the hard way that when the music is playing, bankers want to dance. One way to restrain the excesses of booms is to impose countercyclical prudential requirements to lessen the procyclical nature of the Basel 2 framework for credit risk.