The BIS Working Paper No. 128, titled "Towards a macroprudential framework for financial supervision and regulation," by Claudio Borio, discusses the need to strengthen the macroprudential orientation of current prudential frameworks to better address financial instability. The paper defines and contrasts the micro- and macroprudential dimensions of financial regulation, examining the nature of financial instability and the role of risk perceptions and incentives. It argues that financial instability has significant economic costs and that a macroprudential approach is essential to mitigate these risks. The paper highlights the importance of balancing market and policy-induced discipline, and the need for a broader perspective to identify and address systemic risks. It also discusses the implications of financial instability, the role of risk perceptions, and the need for improved risk measurement techniques. The paper concludes that a macroprudential approach can help in identifying vulnerabilities and designing appropriate policy responses. The paper also discusses the New Basel Capital Accord and its implications for procyclicality, and the importance of longer horizons and the role of maturity in risk assessment. The paper emphasizes the need for a more comprehensive and integrated approach to financial regulation and supervision to ensure financial stability.The BIS Working Paper No. 128, titled "Towards a macroprudential framework for financial supervision and regulation," by Claudio Borio, discusses the need to strengthen the macroprudential orientation of current prudential frameworks to better address financial instability. The paper defines and contrasts the micro- and macroprudential dimensions of financial regulation, examining the nature of financial instability and the role of risk perceptions and incentives. It argues that financial instability has significant economic costs and that a macroprudential approach is essential to mitigate these risks. The paper highlights the importance of balancing market and policy-induced discipline, and the need for a broader perspective to identify and address systemic risks. It also discusses the implications of financial instability, the role of risk perceptions, and the need for improved risk measurement techniques. The paper concludes that a macroprudential approach can help in identifying vulnerabilities and designing appropriate policy responses. The paper also discusses the New Basel Capital Accord and its implications for procyclicality, and the importance of longer horizons and the role of maturity in risk assessment. The paper emphasizes the need for a more comprehensive and integrated approach to financial regulation and supervision to ensure financial stability.