Macroprudential is no longer the policy that dares not speak its name. To safeguard these hard-won reforms, Europe now has a Single Supervisory Mechanism and European Systemic Risk Board. The Bank of England now houses the Prudential Regulation Committee and the Financial Policy Committee. The independence of these committees and their accountability to the people they serve through their respective parliaments are essential bulwarks against the inevitable recidivism that follows a financial crisis. The longer we go without disruption the more important it is to remember, remember that when it comes to financial stability, success is an orphan. Since the crisis, macroeconomic outcomes have been much less benign. Growth in both the euro area and the UK has been, on average, a percentage point lower; and inflation has been twice as volatile. There has been a persistent margin of spare capacity, with unemployment, on average, 1-1½ percentage points higher. But there have also been important differences. While the euro area has continued to experience ‘divine coincidence’ the UK has not (Chart 1). In the euro area, inflation has averaged half a point below target, reflecting in part the drag from persistent slack in the labour market. In contrast, UK inflation has been above target, averaging 2.3%, during a period where the economy was operating well below potential. That reflects the inflationary impacts of two large exchange rate depreciations and weak productivity that have offset a major positive shock to labour supply.
Efforts are being made both by the financial industry and the policy-making community to address the most important micro issues, including the lack of transparency, product complexity and inappropriate incentives in the  4  BIS Review 75/2010  originate-to-distribute model. However, in recent months there have been some, albeit nascent, signs of improvement in securitisation activity, in part supported by a narrowing of spreads on securitised products (i.e. yield on securitised products over Libor). The narrowing spreads, which reflects the compensation investors are demanding for holding these assets, could bring prices closer to levels where issuance of ABS securities makes economic sense. This has been indicated in the responses to ECB bank lending surveys and in lower retention rates by banks for newly-issued ABS. While it is difficult to disentangle the relative contribution of micro and macro factors to the improvement, it seems clear that the improved economic outlook has played an important role. IV. Overall assessment  Let me now conclude with the overall assessment of the identified risks to euro area financial system stability (slide 15). Although the main risks to euro area financial stability essentially remain the same as those to which attention was drawn in the last issue of the FSR, their relative importance has changed significantly over the past six months.