The term “macroprudential”: origins and evolution (original) (raw)
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Macroprudential Policy in Post-Crisis Banking Regulation
World Economy and International Relations, 2017
In the wake of the recent financial crisis, the term "macroprudential" has become a true buzzword. A core element of international efforts to strengthen the financial system is to enhance the macroprudential orientation of regulatory and supervisory frameworks. Yet the term was little used before the crisis, and its meaning remains obscure. This special feature traces the term's origins to the late 1970s, in the context of work on international bank lending carried out under the aegis of the Euro-currency Standing Committee at the BIS. It then describes its changing fortunes until its recent rise to prominence.
The emergence of macroprudential bank regulation: A review
Acta Oeconomica, 2017
Although the macroprudential regulation only became a central topic of bank regulation after 2008, recognising and analysing risk, what now we call macroprudential, has formed part of the thinking about banking risk for a long time. A real turn of events was caused by the Global Financial Crisis. Since then, as a consequence of the huge taxpayers’ burden and the mutual reinforcing effect of sovereign and banking crises, the main course of bank regulation has become the elaboration and implementation of regulation with a macroprudential perspective. This article reviews the history of the international evolution of macroprudential regulation from the perspective of both the regulation’s motivations and its conceptual and practical developments. Its main focus is the development of the ideas of a macroprudential perspective on prudential policy and the way these ideas eventually led to concrete experiences with macroprudential regulatory tools. As a conclusion, the author raises the q...
The Theoretical Framework of Macroprudential Policy and its Place in the Scheme of Economic Policy
Microprudential regulation and supervision – focused on institutional risks – cannot guarantee the stability of the financial system. Therefore special attention should be paid to macroprudential regulation and supervision to address systemic risks. The purpose of this study is to provide the historical context and a theoretical framework for macroprudential regulation and supervision – a new area of economic policy. To this end, we shall examine the causes for the spread of macroprudential policy, its basic concepts, and thirdly, its place within the scheme of economic policies.
ECMI Commentary, 2009
This is not the first international banking crisis the world has seen. The previous ones occurred without credit default swaps, special investment vehicles, or even credit ratings. If crises keep repeating themselves, it seems reasonable to argue that policy makers need to carefully consider what they are doing and not just "double up" by superficially reacting to the specific features of today's crisis. While we cannot hope to prevent crises, we can perhaps make them fewer and milder by adopting and implementing better regulation-in particular, more macro-prudential regulation.
Macroprudential policy: what we have learned and where we are going
2010
The renewed tensions in financial markets highlight the persistent fragility of the global economy, almost three years after the beginning of the crisis in the summer of 2007 and despite the unprecedented policy actions taken to support the economy. They also underscore the importance of maintaining a sound financial system, both to support economic growth and to allow the proper transmission of monetary policy through smoothly functioning financial markets. Looking forward, it is clear that the global recovery cannot be sustained without adequate policy actions devoted to long-term economic stability and a healthier financial system.
Macroprudential Supervision: A Key Lesson from the Financial Crisis
In this paper we argue that the introduction of macroprudential supervision constitutes the key lesson from the crisis for financial regulation and supervision. We discuss the complex legal and institutional frameworks of macroprudential supervision in Austria and in the EU. In Austria, we identify room for improving the current institutional setup, e.g. by enhancing the role of the supervisory authority and the central bank, defining a comprehensive macroprudential strategy (including a communication strategy) and implementing an internal governance structure that avoids blameshifting among the relevant institutions. At the EU level, we find that the ongoing macroprudential review should address the politico-economic challenges posed by the wide-ranging macroprudential powers of the Single Supervisory Mechanism (SSM) to ensure adequate political control. Moreover, we show that traditional microprudential instruments (e.g. Pillar 2) are conceptually ill-suited to pursue macroprudent...
Macroprudential Policy: A Blessing or a Curse?
SSRN Electronic Journal, 2000
After the destructive impact of the global financial crisis of 2008, many believe that pre-crisis financial market regulation did not take the "big picture" of the system sufficiently into account and, subsequently, financial supervision mainly "missed the forest for the trees." As a result, the need for macroprudential aspects of regulation emerged, which has recently become the focal point of many policy debates. This has also led to intense discussion on the contours of monetary policy after the post-crisis "new normal." Here, I review recent progress in empirical and theoretical research on the effectiveness of macroprudential tools, as well as the current state of the debate, in order to extract common policy conclusions. The work highlights that, despite the achievements in the literature, the current experience and knowledge of how macroprudential instruments work, their calibration, and the mechanisms through which they interact with each other and with monetary policy are rather limited and conflicting. Moreover, I critically survey and note the current challenges faced by macroprudential regulation in creating stable, yet efficient financial systems. At the same time, I emphasize the importance of accepting that many risks may remain, requiring that we proceed prudently and develop better plans for future crises.
The International Dimensions of Macroprudential Policies
Social Science Research Network, 2017
BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. This publication is available on the BIS website (www.bis.org).
The Next Decade of Macroprudential Policy
Bank of Greece Financial Stability Review, 2022
This paper presents an overview of key proposals formulated by the European Systemic Risk Board (ESRB), the European Banking Authority (EBA) and the European Central Bank (ECB) in the context of the review of the macroprudential policy framework of the European Union (EU), aimed at improving its operation and efficiency over the medium term.
The Macroprudential Framework : Policy Responsiveness and Institutional Arrangements, 2013
This paper gauges if, and how, institutional arrangements are correlated with the use of macroprudential policy instruments. Using data from 39 countries, the paper evaluates policy response time in various types of institutional arrangements for macroprudential policy and finds that the macroprudential framework that gives the central bank an important role is associated with more timely use of macroprudential policy instruments. Policymakers may also tend to use macroprudential instruments more quickly if the ability to conduct monetary policy is somehow constrained. This finding points to the importance of coordination between macroprudential and monetary policy.