The Eurosystem applies haircuts in the valuation of collateral, so as to manage the credit risk inherent in collateral policy. As the euro area crisis protracted, the fifth stage of the crisis – the European confidence crisis – began in summer 2012, as nervousness in the sovereign bond markets culminated and fell even upon large euro area countries, namely Spain and Italy.
Again, the crisis vividly raised awareness on the endogenous nature of many systemic episodes of financial instability and on their negative externalities that could be of great importance in determining macroeconomic outcomes. From a policy perspective, the new focus has led to an increased interest in the macro-prudential approach to bank regulation and supervision, following ideas developed originally by the Bank for International Settlements.