Alexandre Lamfalussy and the Origins of the BIS Macro-Prudential Approach to Financial Stability

Among the international policy institutions, the Bank for International Settlements (BIS) is known for its sensitivity to financial stability issues. Typical for the BIS is a macro-prudential approach. In this paper, it is argued that Alexandre Lamfalussy, who was at the BIS from 1976 to 1993, played a crucial role in shaping the BIS approach. Typical for Lamfalussy are a broad macroeconomic view and a focus on the systemically important institutions. In Lamfalussy's view, there is thus very much an overlap between the micro- and macro-prudential dimensions of financial stability. The main reasons for his sensitivity to financial fragility were: a Keynesian Weltanschauung (that a market economy is not sufficiently self-correcting), the emphasis of Dupriez (his teacher) on cycles, Lamfalussy's experience as a commercial banker, BIS involvement in financial stability issues, especially the Latin American debt crisis of 1982-83 and research on financial innovations