Macro-prudential Regulation Post-crisis and the Resilience of Financialization
Institutional capability to limit the financial cycle had to be generated that extended beyond the already given. New policy settings had to be set up against the interests and ideas of entrenched micro-prudential regulators within central banks and financial regulators, while new instruments needed to be developed and calibrated. Described as wasteful in the upswing and painful in the downswing, the problem with financial cycles is that they are evident only ex-post to micro-prudential risks management systems of banks. Scholars of financial regulation, basing themselves on the insights of historical institutionalism have identified the potential for fundamental changes in the long run. V. Constancio’s language is clearly a politicizing one that emphasizes the contingent character of the financial cycle which is amenable to intervention by the public. Constancio’s position takes a critical perspective on house price appreciation, a central feature of financialization and its implied wastefulness, making it a moral imperative for central banks to act against it.