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The government should also focus on systematic risk contribution because during the financial crises losses tend to spread over other financial institutions also. The government should try to form a regulation that reduces the risk of spreading over the losses to financial institutions. A financial contribution to systematic risk can be large because of its correlation with financial difficulties among the other institutes or causes financial difficulties at other institutes. Therefore new measures should be taken to reduce the risk of both the channels. Asset price booms can be regulated by implementing strict fiscal and monetary policies. These policies should take into consideration price stabilization and macro-financial stability. There has to be effective co-ordination between domestic and international policies. The UK Government should try to stabilize all the financial institutions that hold illiquid assets. The regulators have to combine macro-prudential and macro economic analysis by using sectoral analysis


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