Preparing for the Next Financial Crisis

250 Macroprudential policy

time- varying, bank- specic capital requirements, but non- UK regulated

banks (resident foreign branches) increased lending.

− It favours the inaction bias, if the negative eects of national MaPs are felt

only on foreign countries. In this case, the macroprudential supervisor will

have no incentive to intervene to correct an unsatisfactory situation in terms

of welfare at the global level. This might occur if nancial institutions would

face stronger pressures from the political authorities, without the macropru-

dential authorities opposing them in order, for instance, to maintain a high

credit ow in the context of a recession in the home country. In such a case,

banks might reduce the activity of their fore ...