microprudential  and  macroprudential  policies,  We must be particularly vigilant about this point in order to ensure the overall macro-welfare of the economy and guarantee the smooth financing of the economy. For example, imposing stringent requirements on financial institutions during an economic downturn may not be an appropriate policy response. Although it would reinforce the individual robustness of financial institutions, it may further subdue economic activity by causing a credit crunch for example. We would then enter into a negative feedback loop where the social and economic costs of regulation have systemic repercussions. There is thus a need under such circumstances for a clear prioritisation of macroprudential policy over microprudential policy in order to minimise the economic and social costs of the adopted measures and to guarantee the smooth financing of the economy, throughout the economic cycle. My second point is that this need for prioritisation must be addressed in a wider and clear governance framework of the interplay between macroprudential policies and other public policies. An optimal macroprudential policy framework must resolve such interaction issues by ensuring complementarity with monetary policy and consultation with fiscal policy. (i)  First, macroprudential policy is complementary to monetary policy in so far as the two policies may reinforce or take over from each other, when one of them is constrained. For example, when monetary policy is at the zero lower bound, macroprudential policy can help to give the economy an additional policy impulse.

•  Second, maintaining price stability does not guarantee financial stability. In the euro area, the inflation mandate has always been fulfilled, but has not prevented the emergence of crises in the region. These crises have forced central banks to broaden their mandates to include financial stability in order to ensure the functioning of the monetary policy transmission channel as well as to guarantee the smooth financing of the economy. Stable inflation and financial stability are therefore two objectives that monetary and macroprudential policies respectively seek to achieve. •  Third, the Lehman episode and the euro area crisis have confirmed that financial crises do not stop at borders. Consequently, financial system regulation must be the fruit of international cooperation. These lessons, in the post-crisis world, are at the heart of policy-makers’ actions. Financial crises have led us to renew our approach to financial system regulation, and notably to supplement it with a macroprudential perspective. But what is a macroprudential policy? How can we define clear objectives? What are the policy instruments? How can we organise it? What imbalances need to be redressed? These are only some of the numerous issues that contributors address in this Review. In particular, the broad scope of policy action is a major challenge. We especially need to anticipate all possible conflicts with other economic policies, such as microprudential, monetary or fiscal policy. I will now identify at least two prerequisites to ensure that macroprudential policy is effective: First, if conflicts arise between macroprudential policy should prevail.