To implement these restrictions, the Board adopted regulations in 2001 that require merchant banking investments to be disposed of within 10 years after purchase (or 15 years for investments made through a qualifying private equity fund), and that limit the officer and employee interlocks between financial holding companies and portfolio companies.
This requires, for instance, integrating widespread financial instability into aggregate models, accounting for the fundamental role of bank defaults, the design of bankruptcy rules, fire sales and elevated discontinuities that are typical of financial (in)stability. Macro stress-tests, for instance, require integrating complex second-round effects of bank deleveraging after a shock.