We will aim for close cooperation with the FSOC and other authorities for macro-prudential oversight. The case for macro-prudential oversight So what exactly is macro-prudential oversight? In many respects, it is the missing link between the different approaches of a central bank – which has such an important stake in stability at a macro level – and a financial supervisor – concerned with the financial soundness of individual market participants. The de Larosière report argued pointedly that before the crisis, supervisory arrangements, whilst concentrating on the supervision of individual firms, were placing too little emphasis on the stability of the financial system as whole. Indeed, until the late 1990s, the dominant view  2  BIS Review 156/2010  in policy circles was that if individual institutions were financially sound, the financial system as a whole would also be necessarily sound. We now know that relying only on micro-prudential supervision to ensure financial stability suffers from the fallacy of composition. What is true for a part, or even for all parts, is not necessarily true for the whole. Amongst other elements of systemic risk, inter-linkages between institutions, correlated and concentrated exposures to risk, as well as herding behaviour may contribute to a destructive dynamic between institutions, markets and infrastructures. This would ultimately threaten the stability of the whole system. Putting macro-prudential oversight into practice Putting macro-prudential oversight into practice raises two questions: who should be charged with macro-prudential oversight and how it should be performed? Let me start with the question of “who”.
These countries are included in order to help the West to overcome the recapitalization problems. The British Prime Minister Gordon Brown strongly supports new "Bretton Woods" Agreement for the international monetary system. The freedom that the New York institutions for residential sector financing enjoy currently, will vanish. It seems that the Arabian countries and Russia are not ready to discuss in this direction, or it just seems like that. But Putin, during his visit to China, suggested the Chinese leaders to initiate trade in their national currencies, showing explicit non-confidence in the US Dollar. The Persian Gulf countries are planning a monetary union. Will they take this step? According to all this, dear Ladies and Gentlemen, we are living in an exciting historical period. Yes, it is crisis. But, probably, it is not by chance that the wise Chinese have two signs for the crisis. The one denotes the danger, and the other one, possibilities. This crisis is a real possibility to learn a lot, in this case from the mistakes of the developed ones, in order to build a financial system and an economy which will be less vulnerable to any future shocks. Thank you! 6  BIS Review 18/2009