And I am proud to have been along for the ride, not least in my role as Chair of the ESRB’s Advisory Technical Committee. The beginning of the road, in terms of when “a blueprint” of the ESRB reached the public eye, was back in 2009. A high level group chaired by Jacques de Larosière recommended, among other things, that a Union-level body be established with a mandate to oversee risk in the financial system. The aim was to address one of the fatal flaws revealed by the financial crisis – the lack of a truly macroprudential approach for safeguarding the stability of the diverse and interconnected EU financial system. Before the crisis, the quality of supervision varied substantially between countries, and its coordination within Europe was anything but sufficient. The concepts of macroprudential oversight and policy were largely unheard of and it is probably fair to say that most supervisors (or anyone else for that matter)  |1  could not see the woods for all the trees, let alone knowing how they were connected to the “vegetation” in other countries. Part of the remedy would be an EU body that in a holistic way brings together a representation and expertise as broad as its system encompassing mandate. The ESRB was created more or less on the basis of this blueprint.
As we move forward, we may need to strengthen that flexibility even further. We do not have perfect foresight as regards what risks we will have to tackle further down the road. Nor do I think that we will ever develop the perfect tool for every conceivable financial stability risk out there. One thing to bear in mind in all this, is that whether the perspective is global, regional or national, it all boils down to the same thing - safeguarding the stability of the financial system. And in today’s highly interconnected world, it is quite obvious that we to some extent are all in this together. This brings me to a related issue where the ESRB has played a leading role. Reciprocation of macroprudential measures – key for their effective implementation An important prerequisite for effective implementation of macroprudential policy in a financially highly integrated world is that the measures in question can affect all financial actors which influence the specific risk that authorities are trying to mitigate. This is not always the case. For example, foreign branches are regulated by authorities in the home country of the parent company, and may not be affected by measures taken in the country where they are active. Reciprocation may in such a situation help mitigate the risks, minimize potential regulatory arbitrage and also provide a level playing field.