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. macroprudential policy can also prevent the build - up of asset bubbles in specific sectors in a context of low interest rates. this complementarity should not however jeopardise the independence of central bank monetary policy decision - making. bis central bankers ’ speeches ( ii ) second, the optimal framework must promote consultation with fiscal authorities in order to ensure the full effectiveness of macroprudential policy measures that are often designed as pigouvian taxes generating resource transfers. this requires cooperation and information - sharing among the authorities involved in macroprudential policy decisions. such as many countries have already adopted, a collegiate macroprudential authority, with a clear division of responsibility between central banks, the ministry of finance, market authorities, and banking supervisors, can ensure this cooperation. i will not dwell further on these topical issues, which am sure will give rise to fascinating discussions. it is my hope that we can collectively contribute to enlighten this policy debate. let me now give the floor to our panellists. i suggest that we start with governor daniel tarullo, who will give us the vision of the united states on macroprudential issues. bis central bankers ’ speeches

deficit ) and exerted worldwide pressure on the long end of the yield curve. • second, part of the bubble can be explained by more " structural " factors such as asymmetry in financial development between emerging and developed economies. according to the analysis developed by caballero and others, the world suffers from an " asset shortage ". the supply of liquid and safe financial instruments is insufficient to meet demand, and that supply is asymmetrically distributed across the world. as the us is the primary supplier of liquid and safe assets, it attracts inflows of capital, a process which accentuates global imbalances. excess demand for those assets pushes their prices up, which triggers financial bubbles. financial development in surplus countries would go a long way to solve that problem by reducing the asset shortage, thus the probability of future bubbles. • third, there is no denying that weaknesses and failures in financial markets played a major role in the build up to the crisis. over the last decade, financial innovation has been organized to " transform " illiquid and risky instruments into ( apparently ) safe and liquid assets. that unsustainable process has abruptly come to an end with the burst of the credit bubble. during that period, rating agencies, accounting rules, unregulated and off balance sheet entities as well as very poor risk management all contributed, willingly or unwillingly, to fragilize our financial systems. those weaknesses are at the origin of the crisis. had they been addressed in due time, most of the problems we are now dealing with could have been avoided. creating a new regulatory regime and strengthening our supervisory arrangements are at the forefront of efforts conducted at the national and, for the eu, at the european level. those efforts are closely coordinated worldwide through the g20 process and the newly created financial stability board. central banks'response to the crisis history taught us that banking crises degenerate into deep and lasting depressions unless they are dealt with quickly and forcefully. those lessons were not lost on both fiscal and monetary authorities and the policy response worldwide has, indeed, been exceptional by any historical standard. i would like to focus here on three characteristics of central banks interventions • first, they have been fast and decisive. indeed, the start of the crisis can be dated back to august 9 2007, when the eurosystem provided up to 95 billion euros in exceptional liquidity support to the interbank market. as the crisis developed, those interventions multiplied and evolved, a point