in the interest of the unit - holders or of the public. we should explore whether this provision can be effectively used for macroprudential purposes. finally, the creation of leverage via derivatives and securities financing transactions ( sft ) and the pro - cyclical effects of margin and haircut - setting practices in these transactions would also need to be addressed. macroprudential authorities should be given the power to set floors on haircuts and margins on derivatives and sft at the transaction level. furthermore, they should be able to change these in a time - varying manner. the current margin and haircut - setting practices stimulate the build - up of leverage via these transactions in good times – when there is a tendency to under - price risk – and amplify deleveraging in bad times. while a number of policy measures aimed at limiting the pro - cyclical effects of margin and haircut - setting have already been adopted or are underway, none of these steps envisage their time - varying implementation by macroprudential authorities. this new macroprudential framework could build on the current regulatory frameworks and policy recommendations as applicable to derivatives and sfts at eu and global level. these frameworks include the fsb policy recommendations for haircuts on non - centrally cleared securities financing transactions, the bcbs - iosco margin requirements for non - centrally cleared derivatives and the european market infrastructure regulation ( emir ). standardised margin and haircut schedules exist within these frameworks, and could form the basis for setting macroprudential margins and haircuts. for example, macroprudential authorities could build on the standardised fsb / bcbs - iosco haircut and margin schedules, see the may 2015 edition of the ecb ’ s financial stability review. acharya, v. v. and t. yorulmazer ( 2007 ), “ too many to fail – an analysis of time - inconsistency in bank closure policies ”, journal of financial intermediation, vo. 16 ( 1 ), pp. 1 – 31. adrian, t. and m. k. brunnermeier ( forthcoming ), “ covar ”, american economic review. brunnermeier, m. k. and l. h. pedersen ( 2008 ), “ market liquidity and funding liquidity ”, the review of financial studies vol. 22 ( 6 ), pp. 2201 – 2238. see also the

product of individual states in the united states are smoothed, with about 40 percent smoothed by insurance or cross - ownership of assets, a quarter smoothed by borrowing or lending, and one - eighth smoothed by the federal transfers and grants. in other words, the contribution of markets is five times higher than the contribution of fiscal tools. 2 regions within federations in europe exhibit high levels of risk - sharing, too. for example, in pre - unification germany, see obstfeld, m. and k. rogoff, “ foundations of international macroeconomics ”, harvard university press, 1996. asdrubali, p., b. sorensen and o. yosha, “ channels of interstate risk sharing : united states 1963 – 1990 ”, quarterly journal of economics, vol. 111, 1996, pp. 1081 – 1110 ; athanasoulis, s. and e. van wincoop, “ risk sharing within the united states : what do financial markets and fiscal federalism accomplish? ”, review of economics and statistics, vol. 83, 2001, pp. 688 – 698. see also del negro, m., “ asymmetric shocks among us states ”, journal of international economics, vol. 56 ( 2 ), march 2002, pp. 273 – 297. bis central bankers ’ speeches virtually all shocks to per capita state gross product were smoothed. however, due to less developed capital markets than in the united states, the largest portion – 50 percent – was smoothed through the federal tax transfer and grant system, and 36 percent were smoothed through financial markets. 3 for countries in a monetary union such as the euro area, risk - sharing is particularly important because the single monetary policy is unable to address asymmetric shocks. with disjoint business cycles across countries, idiosyncratic shocks to emu member states need to be insured through robust market or fiscal mechanisms. reducing the volatility of aggregate consumption through various risk - sharing mechanisms can provide significant welfare gains for countries hit by specific shocks. and, by reducing internal divergences and facilitating macroeconomic adjustment, risk - sharing can be beneficial for the monetary union as a whole. at this point it is quite clear that, in the foreseeable future, a number of mechanisms that have the potential to improve risk - sharing across countries will not progress quickly in europe. for example, labour mobility will likely remain below levels achieved in commonlanguage federations such as