Based on qualitative analysis of four Liberal Market Economies (Australia, Canada, US and UK) LMEs and two Coordinated Market Economies (Germany and Japan), this study argues that narrowly focused current debates based on micro and macro-prudential regulation are misleading, the reasoning is flawed and the resultant policy suggestions are harmful. What appears to have been crucial in regulatory/supervisory effectiveness and financial system resilience is whether there are structural and institutional complementarities and agency-level enabling conditions that reinforce conservative bank behaviour and create a space for pragmatic, proactive, questioning, and where necessary, aggressive regulatory/supervisory decisions and actions. Thus, a design of appropriate and effective mix of policy and institutional responses in post-GFC era requires identifying, understanding, and analysing interactions among multiple interdependent variables that affect regulatory and market failures, and how they would be influenced through agency-level responses rather than exclusive focus on micro/macro-prudential regulation, and/or supervisory/regulatory model.
