Professor Philip Lane:

The issue here relates to taking the macro view. One approach to supervising banks is to look at the individual bank, its behaviour, its data and so on. Another approach, in the spirit of the macro-prudential view, looks at the whole system. If one looks at the whole system, as was happening in the mid-2000s, and one sees extraordinary rates of collective credit risks, one might think: "I do not know which bank is taking more risks and which is taking less risks, but collectively this is excessive." From the macro data, a determination is made that, collectively, there is too much lending going on and it must be insisted that banks reduce their risk-taking collectively and hold out more capital against their lending. If that is done promptly - and the Central Bank is obliged under EU legislation to look at this every three months - the hope is that this can be a help in reducing the risk of a future crisis.