When talking about macroprudential policy, some observers have yet found it useful to make a distinction between it and regulation. Paul Tucker, for instance, defines macroprudential policy as “dynamically adjusted financial regulation”. Given that definition, one could argue that a well-designed and stringently implemented financial regulation is the first line of defense against systemic risks.
Macroprudential policy – that is, the dynamic adjustment of regulation – is the important second line of defense. 3 High-quality analysis reduces the inaction bias [Slide 6] Most economists and policy-makers seem to agree that the key objective of the macroprudential policy is to provide additional resilience to financial institutions and the financial system against cyclical and structural systemic risks and vulnerabilities.