Alex Brazier: Financial resilience and economic earthquakes

Speech by Mr Alex Brazier, Executive Director for Financial Stability Strategy and Risk of the Bank of England, at the University of Warwick, Warwick, 13 June 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

In the aftermath of the financial crisis, a new buzz phrase emerged in economic policymaking: macroprudential policy. It tells you something about economic policymakers that this phrase qualified as buzz. But after a fragile financial system had sideswiped the economy, turning what could have been an economic downturn into a disaster, it was difficult to disagree with the aim: to promote a financial system that could serve households and businesses in bad times, as well as good. That means a financial system that is resilient to the bad times, but not so resilient as to be inefficient the rest of the time.

In many respects, the idea of macroprudential policy was vintage wine in a new bottle. The term was used at least as far back as 1979 and the approach was set out in some depth in 2000 by Andrew Crockett, General Manager of the Bank for International Settlements and previously an Executive Director at the Bank of England.