As crises often do, the global financial crisis we have been experiencing has highlighted key policy challenges that were insufficiently attended to in the past and has focused minds on needed improvements. In Europe, the crisis has exposed fault lines in governance and deficiencies in the architecture of the financial supervisory and regulatory framework. The need for more effective micro- and macro-prudential regulation and supervision, but also for better coordination between the two as well as among regulators, has been underlined. The crisis has confirmed that central banks can play an important role in safeguarding financial stability, but also demonstrated that a mandate to maintain price stability is not sufficient to ensure financial stability, strengthening the case that central banks need to be armed with the appropriate policy tools to enhance their contribution to financial stability.

The crisis has prompted critical thinking about the EU economic and financial policy frameworks and the need for a new supervisory architecture. The severe economic cost suffered as a result of the crisis, and the acknowledgement of the need to limit the likelihood of future costly occurrences, has provided an important opportunity for the development of an improved financial stability framework for Europe and highlighted the urgency of the need for a comprehensive crisis management regime. Not that this was not understood earlier. The lack of harmonisation in the European legal and supervisory framework and its potential cost in managing crises were known. Nevertheless, perhaps due to the complications and political sensitivities involved in addressing crisis management, and perhaps owing to other policy priorities, undue reliance was arguably given to the role of crisis prevention, avoiding prickly issues such as how potential losses associated with the efficient resolution of a cross-border financial institution were allocated.