Building on the counter-cyclical consensus: a policy agenda

he long history of financial cycles, of which the current global crisis is an example, shows that pro-cyclical behaviour is inherent to the functioning of financial markets. Pro-cyclicality is characterised by excessive risk-taking and financial activity in good times, followed by insufficient risk-taking and financial activity in bad times. The pro-cyclical nature of finance calls for regulation that "leans against the wind".

Read the background paper of the Basel-III conference written for FEPS and IPD by Stephany GRIFFITH-JONES, Jose Antonio OCAMPO and Ariane ORTIZ, Initiative for Policy Dialogue