, as well as to the relationships between the main economic and financial sectors. the third part consists of the regular collection of firm - level information and data, in particular for large and complex financial institutions. this relates to specific items of information regarding on - and off - balance - sheet items, with appropriate breakdowns of exposures related to the asset and liability sides ( geographical, sectoral, currency, etc. ), including the identification of counterparties. for the identification of interlinkages between major intermediaries and the assessment of contagion risks, an international “ risk map ” – as proposed for example in the de larosiere report – would be particularly helpful. 12 lastly, for the large and complex groups, micro - prudential information about liquidity and risk management models would be required. the second instrument is a suite of analytical tools and models and a staff familiar with them. although formal models have their limitations, they do help structure the qualitative and quantitative information that is collected for the regular risk assessments. existing research offers eight broad groups of approaches and models : financial stability indicators, contagion and spillover models, early warning signal models, stress testing models, macro - financial risk - based flow - of - funds accounts models, macro - econometric forecasting models, calibrated general equilibrium financial stability models and other models ( including models of firm and household vulnerabilities ). these models have their pros and cons, but some are more promising or easier to implement than others. each serves different purposes, but there are also overlaps. since financial stability analysis in general and macro - prudential analysis in particular is much less understood than other policy areas, it is advisable to use a multiplicity of approaches. how many of the overall list can be used and how much will depend on the resources available to develop and maintain them. but the investment in the analytical toolkit is likely to be significant. i expect most authorities having to develop a macro - prudential supervisory function to extend or reallocate resources in order to meet these requirements. “ high - level group on financial supervision in europe ”, report, brussels, 25 february 2009. 2. containing risks if risks to systemic stability have been identified, the next step is to contain them. i would consider three ways to achieve this. a first option is to communicate the risks and the sources of these risks to financial market participants, with a view to alerting

to the central bank or to the supervisory authority. in assessing the two models, a key issue to consider concerns the conflict of interests, in particular within the central bank and within the supervisory authority, respectively. let ’ s consider first the conflicts of interest within the central bank, which would emerge in particular in model 2, between the objective of price stability and the objective of macrofinancial stability. a conflict would arise if the central bank would have to address the two objectives with only one instrument, i. e. the interest rate. the central bank could be pushed to use the interest rate not only to achieve price stability but also to counter macro systemic risks. for instance, it could have to increase interest rates prematurely, in order to stop a financial bubble from developing, while the underlying economic developments do not require it. the interest rate is not necessarily the most efficient way to prevent or to prick bubbles. the conflict of interest would vanish if the central bank had two distinct instruments to address the two objectives, with a clear assignment. the interest rate would be assigned to achieving price stability, while macro - prudential measures would be aimed at macrofinancial stability. during the current crisis, the ecb has shown that such a separation can be achieved. on the one hand the interest rate has been used with a view to achieve price stability, while, on the one hand, liquidity - injecting measures have aimed at stabilising the money market. each measure has been adopted and justified to the public in such a way as to keep separate the two objectives. overall, the experience suggests that the interest rate and macro - prudential instruments are rather complementary and do not give rise to conflicts of interest. let ’ s consider now the potential conflicts of interest for the supervisory authority, between the macro - and micro - prudential objectives. supervisory authorities might have to make tradeoffs to achieve both. for instance, it would be more difficult for a supervisor to decide to tighten capital requirements and liquidity ratios in a booming economy if some banks are individually experiencing difficulties. there might be an incentive to address these difficulties with general, rather than specific, measures. in the european framework, given that the micro - supervisory authority is exerted at the national level, there is a problem of uniformity of action. in model 1, in which the central bank can only make recommendations, it is not clear how the various national authorities would react and implement it. there could be a situation