Macroprudential frameworks: (too) great expectations? Contribution by Mr Claudio Borio, Head of the Monetary and Economic Department of the Bank for International Settlements, to the 25th anniversary edition of Central Banking Journal, originally published on 5 August 2014.

“Macroprudential frameworks are a welcome response to the Great Financial Crisis. As long argued by the BIS, a stronger systemic orientation is essential if financial stability is to be assured. But macroprudential measures are still very much work in progress. Much scope remains for improving the range of tools available, refining the balance between rules and discretion, and strengthening governance arrangements, both nationally and internationally. Moreover, the experience so far indicates that it would be imprudent to rely solely on macroprudential frameworks when seeking to tame financial booms and busts, with their enormous economic costs. Financial cycles are simply too powerful. Other policies, not least monetary and fiscal, should also play a role. Macroprudential frameworks must be part of the answer, but they cannot be the whole answer.”