10  In addition to these cyclical risks, macroprudential policy is also assumed to need to manage what are referred to as structural risks, or cross-section risks, see the Riksbank (2012). The latter concern financial companies having become so closely interwoven and the degree of concentration in the financial system so high that if problems arise in one area they risk spreading rapidly. The effects on the real economy will be similar to those in Figure 1. Of course, these risks may also change over time. 11  Financial Crisis Committee (2013). Parts of macroprudential policy are also discussed in Swedish Government Official Reports (2013), Förstärkta kapitaltäckningsregler[Stronger capital adequacy rules], which was presented on 16 September. The potential design of a Swedish macroprudential framework is also discussed by Goodhart and Rochet (2011), Bryant, Henderson and Becker (2012) and Vredin, Flodén, Larsson and Ravn (2012). 12  The Riksbank (2013). 13  Ministry of Finance (2013). 8  BIS central bankers’ speeches  Interplay between macroprudential and monetary policy important to consider In principle, of course, if monetary policy were initially to try to stabilise both the business cycle and the credit cycle, and there arose a new policy area focusing on the latter – then this would almost by definition ease some of the earlier pressure on monetary policy. But even if we have now made some progress in attaining a framework for macroprudential policy, there are some questions of principle that still need consideration.
To an outsider, that may not sound significant – indeed, some might reasonably ask why the Committee wasn’t already doing this – but it is notable if only as an idea that the Committee had previously considered and rejected on more than one occasion. Indeed, in his authoritative history of the Committee’s early years, Charles Goodhart notes that, as far back as 1983, there was discussion whether the Committee might also monitor the practical application of agreements. At the time, though, this was seen as somewhat awkward and a step too far. That the Committee now has just such a mandate shows that the commitment to consistent international regulation is undiminished – indeed, it is stronger than it has ever been. Let me conclude by once again welcoming you to Basel, particularly those of you who have played a role in the Committee’s earlier years – we hope that returning here brings back many good memories. For the current Committee members, it is a wonderful opportunity to learn from the wisdom of those who have grappled with these issues before us. We also hope to hear some different perspectives, from the banking industry, and from academia, on the challenges and opportunities that face the Committee. I am therefore looking forward to some productive – and hopefully provocative – discussions this morning. BIS central bankers’ speeches  3