Going forward, a more optimal balance of micro (that is, at the institution level) and macro (that is, affecting broader economy) responses will become increasingly important in the management of such systemic risks. An important dimension to effectively manage the increasing inter-linkages between the financial system and the economy involves the strengthening of cooperative arrangements between Central Banks and other regulatory authorities, within and across borders. Indeed, cooperation, coordination and goodwill have become essential in the increasingly integrated system. Such arrangements could include the more formal institutional arrangements for  BIS Review 130/2007  3  cooperation in surveillance efforts and crisis management, as well as the home-host arrangements for the supervision of international financial institutions, in supporting the early identification of risks and the pre-emptive interventions that need to be made. Cross border surveillance in the Asian region in particular has now been enhanced to ensure that information gaps are identified and that the mechanisms to facilitate information sharing are put in place. Achieving effective inter-agency coordination between financial safety net participants also needs to be considered carefully in the context of crisis management. Inevitably, the task of managing a financial crisis particularly in the areas of timely decision making, coordination and communication become much more complex when the functions of lender of last resort, bank supervision and deposit insurance are allocated to separate agencies, as each respective agency is accountable for discharging its own mandate having regard to its own inherent priorities.

An open exchange of views and information between individual policy actors - without any commitment or mandate to take and implement joint decisions - will strengthen economic governance if it manages to improve the common understanding of the objectives and responsibilities of the respective policy areas and does not dilute accountability. The central legal basis for economic policy co-ordination among Member States within monetary Union is specified in Article 99 (ex 103) of the Maastricht Treaty, which states that “Member States shall regard their economic policies as a matter of common concern and shall co-ordinate them within the Council.” On the basis of this principle, the framework for the definition of economic policy priorities is provided by the “Broad Economic Policy Guidelines” adopted by the Council each year. These channels for policy co-ordination among Member States do not involve the independent monetary policy of the ECB. Any form of exchange of views and information, however, should clearly be distinguished from an attempt to co-ordinate macro-economic policies ex ante, which would give rise to serious information, incentive and enforcement problems. Ex ante co-ordination among different policy actors would blur the fundamental responsibilities of the respective policy areas under the Treaty. This, in turn would reduce accountability of individual policy actors and ultimately increase uncertainty about the policy framework. Given the Eurosystem’s monetary policy strategy, there should be no ambiguity how the single monetary policy will respond to developments in fiscal policies and wage settlements to the extent that they will affect the maintenance of price stability.