Low interest rates and bank deleveraging combine to produce slow growth and rising financial risks in advanced economies. This column argues that appropriate macroprudential policies could contribute to redirecting risk taking, promoting growth and reducing uncertainty through more orderly deleveraging in the financial sector.

Banking runs are a major threat to modern finance. This column makes the case for preventive tools over ex post intervention. It argues for assigning responsibility and novel tools to microprudential regulators for supervising individual liquidity and capital ratios, and to central banks those tools for aggregate liquidity-risk management, with overall control switching to fiscal authorities once intervention appears to require fiscal means.

Current macroeconomic policymaking suffers from an inadequate range of instruments and the absence of a comprehensive assignment of responsibilities. This column introduces a new CEPR Policy Insight designed to remedy these shortcomings. It proposes a framework for monetary, macroprudential, and microprudential policies.

The global financial crisis has led many to propose regulatory measures that will reduce the idiosyncratic and systemic risk of banks. This column argues in favour of the suggestion by the Bank for International Settlements to block banks from paying dividends to shareholders or bonuses if their capital levels fall below a minimum threshold.

There is now a growing consensus among policymakers and academics that a key element to improve safeguards against financial instability is to strengthen the “macroprudential” orientation of regulatory and supervisory frameworks. This column explains the approach and various issues that regulators must address to implement it.