April 08, 2019

ESRB published a report that presents initial considerations on the development and use of a common framework for the macro-prudential policy stance. The macro-prudential policy stance is considered in this report by assessing the balance between identified systemic risk and resilience relative to financial stability objectives, given the implemented macro-prudential policies.

The report first outlines the motivation for a framework for the macro-prudential policy stance and explains how a macro-prudential instrument is used as a policy lever by authorities for macro-prudential purposes. It then presents one potential macro-prudential stance framework that, when "operationalized," would aim to support policymakers in their assessment of risks, resilience, and implemented policies. The risk-resilience framework was chosen as the approach to the stance framework as one which fits in with the existing macro-prudential policy strategies, which could be used to take into account the many facets of macro-prudential policy and which could potentially be developed further. Next, the report focuses on the measurement of the macro-prudential stance and discusses the interactions and aggregation of various stance components, also outlining challenges related to macro-prudential policy objectives, macro-prudential instruments, and the relationship between the two. Finally, the report presents next steps and concludes that the risk-resilience framework has been considered appropriate to utilize as the foundation for the macro-prudential stance assessments. 

In the report, it has been proposed that the assessment of the macro-prudential stance and policy action is a two-tier process, with the stance assessment of implemented policy measures being separate from the assessment of costs and benefits of potential adjustments to macro-prudential policy. It is envisaged that the work on the conceptual aspects of the macro-prudential stance framework would be further developed into an operational framework over the medium term. Macro-prudential authorities could use such a framework when conducting their assessment of risk and resilience and analyzing the appropriateness of their macro-prudential responses. This would require the development of a quantitative concept that is transparent and flexible enough to allow and encourage implementation by national authorities.

The second phase of the work on the macro-prudential stance may advance the concepts of the Growth-at-Risk model, the use of stress testing, and the understanding of the aggregation of stances. In addition, as with all applications of policy, efficient and effective communication is critical to successful implementation; therefore, further efforts could be made in determining the best approach to communicating decisions made after a macro-prudential policy stance assessment. The next step to further develop the presented concepts requires cooperation among the ESRB membership and ESRB working groups. It is envisaged that the "operationalization" of the macro-prudential stance framework will have a significant positive impact on the progression and understanding of macro-prudential policy across Europe.

 

Related Link: Report (PDF)

 

Keywords: Europe, EU, Banking, Risk-Resilience Framework, Systemic Risk, Macro-Prudential Policy, Financial Stability, ESRB

Related Articles
News

FSB to Evaluate Effects of Too-Big-To-Fail Reforms for Systemic Banks

FSB is seeking feedback as part of its evaluation of the effects of the too-big-to-fail reforms for banks.

May 23, 2019 WebPage Regulatory News
News

APRA Releases Minor Changes to Reporting Standards on SA-CCR for Banks

APRA released minor changes to the three reporting standards for the standardized approach for measuring counterparty credit risk exposures (SA-CCR).

May 22, 2019 WebPage Regulatory News
News

APRA on Industry Self-Assessments into Governance and Accountability

APRA released an information paper analyzing the self-assessments performed by 36 of the country’s largest banks, insurers, and superannuation licensees in response to the final report on the Prudential Inquiry into the Commonwealth Bank of Australia (CBA).

May 22, 2019 WebPage Regulatory News
News

APRA Proposes to Amend Guidance on Residential Mortgage Lending

APRA is consulting on revisions to the prudential practice guide APG 223 on residential mortgage lending in Australia.

May 21, 2019 WebPage Regulatory News
News

IASB Proposes Improvements to IFRS 9 and IFRS 16

IASB published the exposure draft ED 2019/2 that proposes amendments to four IFRS standards, including IFRS 9 on Financial Instruments and IFRS 16 on Leases.

May 21, 2019 WebPage Regulatory News
News

Denis Beau of BDF on Supervisory Priorities for Climate-Change Risks

Denis Beau, the First Deputy Governor of BDF, delivered opening remarks at the BCBS-BSCEE-FSI High-level Meeting for Europe on banking supervision.

May 21, 2019 WebPage Regulatory News
News

ISDA CDM to be Deployed for UK Digital Regulatory Reporting Pilot

ISDA announced deployment of the ISDA Common Domain Model (ISDA CDM 2.0) to support the UK FCA, BoE, and participating financial institutions in testing phase two of the Digital Regulatory Reporting pilot for derivatives.

May 21, 2019 WebPage Regulatory News
News

ESAs Amend Technical Standards on Mapping of ECAIs Under CRR

ESAs published a second amendment to the implementing technical standards on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk under the Capital Requirements Regulation (CRR).

May 20, 2019 WebPage Regulatory News
News

OCC Consults on Information Collection for Home Mortgage Disclosures

OCC is soliciting comment on the revision of the information collection titled “Regulation C—Home Mortgage Disclosure.” OCC also notes that it has sent the collection to OMB for review.

May 20, 2019 WebPage Regulatory News
News

ESMA Updates the List of Guidelines Under Its Mandate in May 2019

ESMA updated the overview of guidelines published under its mandate, with information and links to the related documents.

May 20, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3114