maintained. from this angle, the financial sector can be seen to have become more globalised, more complex and more integrated. you will agree that therefore regulation constantly has to adapt to keep up with its changing environment. adopting a systemic view is paramount. with this i mean it is of paramount importance to take due account of the external effects of individual actions and of their repercussions within the financial sector and, ultimately, of their implications for the real economy, sovereigns and taxpayers. in this sense, macroprudential policy provides a framework for thought and action, for deciding how much resilience we want and how much we are willing to pay for it. bis central bankers ’ speeches 2. national dimension : goals and interactions with other policy areas but why do we need a distinct policy? would it not be enough to take system - wide implications into account in other policy areas such as monetary and fiscal policy or microprudential supervision? there are two main arguments why a specific macroprudential policy is called for and both of them i find important. one is set out by nobel laureate jan tinbergen in his contribution “ on the theory of economic policy ” : achieving a number of goals requires an equal number of instruments. for example, setting the interest rate is effective when targeting a specific goal such as inflation. however, using one instrument to try to achieve multiple goals inevitably impairs the effectiveness of that instrument. so even though the interest rate impacts on financial stability, it is likely to clash with the objective of ensuring price stability. moreover, it may be too blunt to achieve this policy goal, especially in a monetary union when risks originate from regions or sectors whose economies are not developing in sync. the second argument : each policy area only should have goals that are not mutually conflicting. would it be wise to make the transport ministry responsible for environmental protection? or would it not be more sensible to have an environment ministry in charge of it? assigning potentially conflicting goals to different policy areas ensures that each policy area is committed to its task. therefore, an independent macro - prudential policy safeguarding financial stability is needed and should be equipped with its own instruments. more precisely, there are two main objectives of macroprudential policy, which should be distinguished carefully. first, it should provide a framework and rules that give the market participants appropriate incentives. this holds true in normal times but especially when crisis management measures have to be applied. second, macroprudential

participants, regulators and supervisors. unlike in evolution, the objective has been set. nevertheless, to achieve the desired goals, interactions with other policy areas as well as cross - border spillovers still have to be taken into account. as a consequence, market participants themselves will have to adapt, to comply with new regulatory requirements and to develop their own responses to a changing environment. some responses might turn out to be unnecessary for a healthy economy. but former fed chairman paul volcker was taking things to extremes when he said, “ the only useful banking innovation was the invention of the atm ”. other innovations, however, are beneficial to the development of our financial system, and those should be the ones that survive. the potential failure of the financial system can come with a huge price tag for society. for this very reason, a stable system is essential. macroprudential policy will have a key part to play in this, and national macroprudential responsibilities are about to be assigned in many countries. appropriate instruments now need to be developed and implemented ; we will have to “ walk the talk ”. this will be a major challenge for some time to come. thank you very much for your attention to the topic which is close to my heart. bis central bankers ’ speeches