The core of the regulation of banking systemic financial risk is to build a banking regulation system based on macro-prudential regulation.
Existing regulators have weighed in too, arguing that separating prudential regulation from consumer protection could make the system less safe.
The global financial crisis has highlighted the importance of prudential regulation of banks for ensuring stability of the global financial system.
The same is true of macro-prudential regulation, the idea that a group of wise men can focus on systemic risk, rather than get bogged down in the details of individual firms’ finances.
The foreign research on macro stress test of banking system was already systemic. The global financial crisis made it clear that stress test was important for macro-prudential regulation.
