, and it provides a firmer grounding. so, message one, taking the macro - prudential approach matters, and yes it can be harder. onto the second message. cassandra was fated by the god apollo to utter true prophecies but not to be believed. the prophecies were of course not of the good sort. in financial stability speak she dedicated herself to one tail of the distribution. somebody will of course say that she was ahead of her times, and thereby missed her vocation as a central banker. let me borrow her mantle for a moment, in the context of minsky's argument that memories of financial crises recede over time and can be replaced by thoughts of a new era arriving. i can observe this happening with the global financial crisis fifteen years or so on. i do get people telling me that'you have solved that one so we can relax '. but the work i set out above on theory and history is timeless. so, let's not fall into the trap of complacency. yes, we must debate the right level of regulation, it cannot be assumed to be perfect, but let's not confuse that with the timeless nature of the threat. that's message two. my third message is to pick up the theme that was at the heart of minsky's critique of keynesian economics post - war, though not of keynes himself, and is also reinforced by kindleberger and james. this is that money and finance matter together because they interact and in so doing create instability. one of the blind alleys that this type of debate went along before the financial crisis was to see it only in terms of whether there were asset price bubbles or not. ultimately that was not only a blind alley but a dangerous one too. since the financial crisis we have seen a change in the relative scale globally of bank and non - bank finance, with the balance shifting towards the latter. and so the focus of 2 / 5 bis - central bankers'speeches authorities has shifted, rightly, towards the latter too. you can see this in the work programme of the global financial stability board. in one sense, we should not be surprised by this shift. we have upped the regulation of banks, reflecting the lessons of the crisis. but then we should remember the focus of minsky and others. the macroprudential risks of the non - bank sector have not originated from this shift, they have been there for well

reduced ( released ) by the authorities ( if necessary, all the way down to zero ) when risk materialises. for a given level of an institution ’ s cet1 ratio, the release of all or part of the ccyb requirement means that the management buffer of the bank automatically increases. what do we know about the effectiveness of this framework? in contrast to microprudential policy, the effectiveness of macroprudential policy cannot be analysed simply by assessing whether a certain increase in the level of capital allows a given bank to absorb a systemic shock of a given intensity. this is certainly relevant, but the goal of macroprudential policy is also to induce banks to absorb losses while continuing to provide credit to the real economy in times of stress and therefore to smooth financial cycles. in this regard, the effectiveness of macroprudential buffers depends on their usability, which can be defined precisely as the willingness of banks to dip into the buffers in order to maintain the flow of credit to the real economy. if buffer usability is low, banks will have greater incentives to deleverage in response to adverse macro - financial shocks. the usability of voluntary buffers should not be taken for granted. market pressure and profitability considerations could provide incentives to banks to conserve these resources, and deleverage instead. 5 uncertainty about the cost and time path for rebuilding these buffers could also disincentivise their use. the academic literature generally shows that higher capital ratios allow banks to satisfy loan demand more easily, in particular in periods of stress. however, there is more limited agreement on whether the relevant factor is the total level of capital or the voluntary buffer, that is to say the gap between the actual level of capital and the capital requirements. this issue is highly relevant to the design of the macroprudential framework. if the only relevant factor for smoothing financial cycles is the absolute level of capital, then macroprudential policy should concentrate its efforts on the accumulation of non - releasable buffers, assuming that banks will make use of them if they incur losses. in contrast, if the relevant factor is not only the absolute level of capital, but the distance from capital requirements, then the availability of releasable macroprudential buffers could basel co mmittee o n banking supervision. ( 2010 ). “ guidance fo r natio nal autho rities o perating the co untercycl