This paper adds to the literature on the US prudential policy and monetary policy that have evolved drastically in response to the Global Financial Crisis of 2007-2009. The subprime crisis that originated in the United States and affected the rest of the world has revealed a number of loopholes in the regulatory framework that made the financial system in the US, as well as in other countries, vulnerable to shocks. It called for the immediate actions from the Federal Reserve Bank, the European Central Bank, and other central banks that struggled to reverse a massive seizure of liquidity in financial markets. The policy makers have also recognized a need to incorporate systemic and macroprudential perspectives into their regulatory frameworks to a much greater extent than before. This paper analyses the sources of systemic risk in the context of the recent financial crisis and discusses the subsequent changes in the macroprudential and microprodential policy in the United States. In addition, the paper compares and contrasts the Fed’s extension of the traditional tools with the changes implemented by the European Central Bank. Policy recommendations to minimize the likelihood of the financial system’s potential vulnerability to shocks are offered.