5 - Is Resilience Enough?

Summary

Chapter 5 shows how reflexive central bank leaders sought to adapt the new policy paradigm in a way that was compatible with the institutional context. This involved both the political economy within which their central bank was embedded (both with respect to the way that central bank independence was installed and the industry relationships they had to entertain) and the way that central bank accountability was secured. I unearth a muted embrace of the new macro-prudential mandate, in particular the discretionary anti-cyclical part, owing to the lack of scientific legitimacy of these new ideas and the fear of politicization inherent in this new regulatory approach. Overall, I find that the bureaucratic work to adapt and operationalize the macro-prudential mandate led to a prioritization of the goal to increase the resilience of the system, whereas the anti-cyclical goal became a secondary element, although the studied countries differed in their emphasis on anti-cyclical action. Such anti-cyclical action exposed central banks to the risk of agonizing both political elites and the financial industry, making reflexive agency leaders shy away from its full enforcement.