ABSTRACT
This chapter examines the regulatory and institutional issues relating to the management of systemic risk in the UK and the EU, and the concept of macro-prudential supervision in financial markets. It defines accordingly the concept of systemic risk in the financial system. It then outlines the rationale for prudential supervision taking into account the experience of the 2007–2009 global financial crisis and considers the specificity of the UK and EU banking sectors to that regard. It also addresses the dichotomy between micro-prudential and macro-prudential supervision, and the instruments that are commonly used to monitor credit institutions. The following two chapters will explore regulatory architecture in the UK and EU, respectively.
