The political authorities and the central banks have to keep the inherent longer-term implications and costs in mind. Macro-prudential policies apply regulatory and supervisory tools in order to curb systemic risk and to enhance financial stability. One innovation in the institutional setting in Europe is the recently established European Systemic Risk Board.
The ESRB has a broad mandate that charges it with macro-prudential oversight in order to contribute to the prevention or the mitigation of systemic risk. The ESRB conducts a thorough analysis of the risks to financial stability in the European Union. The ESRB can issue warnings and make recommendations to both national authorities and authorities at the European level.