term further impetus in this direction could stem from market pressures and from banking union. so far the debate on macroprudential policy has ignored the question of how the structure of the banking system itself might affect an map regime. yet there are at least three reasons why structure – in particular high concentration – should matter. first, the literature on the bank lending channel11 and the bank capital channel12 suggests that large banks with highly liquid and diversified assets are less sensitive to mp impulses ( they adjust their credit supply more gradually to changes in the mp stance ). a high level of concentration, with credit markets dominated by a few large players, would thus make it harder for mp to affect banking credit cycles : if the credit multiplier associated with monetary visco ( 2009 ). as stein ( 2014 ) notes, this activist approach is justified even if the monetary authority does not have an explicit financial stability objective. the point of tackling the underlying financial imbalance is to reduce the variance of inflation and unemployment around their target values. brunnermeier et al. ( 2009 ). acharya and yorulmazer ( 2013 ), which builds on rajan ( 1994 ), strategic complementarities cause herding in banks ’ investment strategies : banks choose to take on correlated exposures because, if they do, negative shocks are more likely to cause systemic crises where institution - specific ( e. g. reputational ) losses are negligible and public bail - outs very likely. one could think of similar complementarities on the liability side of the balance sheet. see catte, pagano and visco ( 2010 ) on the role of map in the us, i. e. whether adopting it would have prevented the bubble ; see also neri ( 2012 ). between 2005 and 2011, the market share of the three largest banks in the european union increased from roughly 46 % to over 60 % ; in the us, it went from 20 % to 30 %, while in japan it remained stable at about 40 % ( bijlsma and zwart, 2013 ). kashyap and stein ( 2000 ). van den heuvel ( 2001 ) ; gambacorta and mistrulli ( 2004 ). bis central bankers ’ speeches policy is low, any attempt to control credit aggregates through mp interventions would require large swings in interest rates, which in turn could cause significant distortions in relative prices outside the financial sector. while the effectiveness of map

are monitored by the markets and payment systems directorate ; macro conditions of any other kind are looked at by the economics and statistics directorate. this information is shared and debated within the financial stability coordination committee. meetings are ordinarily held twice a year, but can be called at any time by the committee members – the heads of the key directorates – or by its chair – a deputy governor. the third and last phase involves a discussion with the board on the key conclusions, which includes a critical assessment of the evidence, a ranking of the risks and, if necessary, a list of suggestions for potential policy actions. a supervisory initiative launched by the bank of italy in 2012 provides an example of the workings of this mechanism. in that case, a prolonged fall in non - performing loan coverage ratios ( a micro signal ) was deemed to be a potential threat for market confidence, particularly in a recessionary scenario ( a macro issue ). the bank therefore launched a targeted but broad on - site review of positions with low coverage ratios to ensure that accounting practices were correct. 25 in order to avoid pro - cyclical effects, in parallel with this wave of inspections the bank of italy asked banks to increase internally - generated resources by cutting costs, selling non - strategic assets, adopting sustainable dividend policies, and revising the criteria for the remuneration of directors and executives. these actions, the results of which have been published, have improved banks ’ practices and standards ; they have helped to reverse the declining trend in coverage ratios, increase transparency and assuage investors ’ concerns. thus, they relied on micro tools but were macro in spirit. these processes will have to be adapted in the light of the radical institutional changes being introduced both at the national level ( establishing a new map authority ) and at the international level ( mip and map coordination and burden - sharing between national authorities and esrb, eba, ssm ). often, the devil is in the detail, and admittedly many details need to be sorted out for this architecture to work well. therefore, it would be sensible to divide our time between speculation on the conceptual challenges posed by the interaction between mp, map and mip and a less exciting but equally crucial effort to create a sound and effective governance structure. 7. conclusions bold policy initiatives are rarely preceded by long periods of careful reflection. on the contrary, they are often taken in response to dramatic and unforeseen changes in the the law that introduced capital requirements and assigned the bank