"This paper examines both the objectives and the available instruments for new macroprudential policy-making bodies. It argues that the objective—financial stability—is best understood as avoiding widespread disruption of financial flows. Achieving this objective requires that policy-makers carry out two different but related tasks. First they must ensure the resilience of the financial system to external shocks. Second they must respond in a timely fashion to future unsustainable expansions of credit and growth of asset prices. These are old policy challenges. What has changed is the emergence of new vulnerabilities in our innovative and relatively lightly controlled financial system, exposed by the recent global financial crisis. Macroprudential policy can be effective in addressing these vulnerabilities but will not remove the major political and institutional obstacles to the effective control of unsustainable credit expansions. "

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