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José Darío Uribe, governor of the central bank, puts a lot of weight on using prudential rules to stop inflows causing financial instability.
Countries from Singapore to Israel have been adding, or tightening, prudential rules such as maximum loan-to-value ratios on mortgages.But greater currency flexibility will also be needed.
After liberalisation in the 1990s, when managing risk became more arduous, and prudential rules were introduced, their health began to fail.
New prudential rules will force publicly-owned savings banks and the co-operative banks to seek higher returns from the same customers that the private institutions are chasing.
Today, as it emerges early from a state bail-out precipitated by its large portfolio of American mortgages, it is again an example this time of the sort of institution that new, more demanding prudential rules encourage.
Europe's banks, laden with bad debts and forced by new prudential rules to hold more capital against corporate loans, will remain leery of fiddly, risky loans to SMEs.Small firms' woes have not escaped detection.
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"Strengthening banks' capital requirements over a sensible period will improve the stability of the global financial system and reduce the risks of another collapse.Much, of course, depends on the detail, as with macro-prudential rules.
Critics of the plan argue that it would interfere with "prudential regulation," the rules set up to preserve the safety and soundness of financial institutions.
The two most common types of rules are economic regulation and prudential regulation.
As noted, everyone agrees that assertions are governed by various norms: moral, prudential, conversational, rules of etiquette.
But the Treasury Department proposal envisions an S.E.C. that would no longer regulate through hard-and-fast rules enforced swiftly and justly, but rather would practice "prudential" regulation, offering up principles and conceptual guidelines and working collaboratively behind closed doors with regulated entities and their self-regulatory organizations when they have violated the law.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com