ECB Framework on Cross-Border Spillover of Macro-Prudential Policies
ECB published a report that presents a best-practice framework to analyze the cross-border spillover effects of planned or enacted national macro-prudential measures. This framework by the Financial Stability Committee (FSC) of the European System of Central Banks (ESCB) is meant to serve as a starting point for national designated and competent authorities when assessing the need for reciprocity in the context of activation of macro-prudential measures. In addition to this report, ECB plans to publish an occasional paper containing a more detailed study of the existing literature on cross-border spillovers, a survey of current national approaches, and the conceptual underpinnings of the FSC framework presented in this report.
Macro-prudential policy can generate unintended cross-border spillovers, owing to regulatory arbitrage and risk management decisions by financial institutions as well as to broader trade and economic activities triggered by the activated measures. Policy instruments should, therefore, be designed to reap the benefits of positive spillovers in terms of enhanced financial stability, while seeking to limit potential negative spillovers. Thus, the analysis of cross-border spillover effects is highly relevant for assessing the overall impact of specific instruments. Overall, to support the assessments of cross-border spillover effects related to macro-prudential policy decisions in the EU, the FSC recommends the following:
- Harmonized FSC Indicator List—The list of indicators presented in this report should be the starting point, providing macro-prudential authorities within the EU with guided discretion for assessments of cross-border spillover effects of planned macro-prudential measures, as well as for ex-post monitoring of these measures. Authorities are encouraged to complement these with other indicators depending on the circumstances in their jurisdiction.
- FSC Empirical Benchmark Tool—This tool offers a basis for deeper spillover analysis. It provides authorities with a user-friendly tool, to be used at their discretion, to gauge the range of potential spillover effects from considered macro-prudential measures.
- Closing of Data Gaps—FSC has identified a number of data gaps that hamper a precise monitoring and assessment of cross-border spillover effects. Accordingly, the FSC recommends that further work be initiated to help close these gaps, also taking into account related initiatives at the ESRB level.
- Threshold values—Indicator-based approaches require well-calibrated thresholds to assess when an indicator signals material cross-border spillover effects. For the time being, FSC recommends adopting a simplified, pragmatic, percentile-based approach. However, it also recommends conducting further work on developing a fully fledged signalling approach over the medium term.
- Reciprocity—The report includes a few suggestions that could feed into subsequent discussions within FSC and ESRB. The tools and indicators provided by the FSC can inform future discussions on the appropriate intensity of reciprocity by identifying the macro-prudential instruments, for which spillovers may be most material. Furthermore, indicator-based analysis reinforces and complements the ESRB guidelines on the design and required flexibility in the use of materiality thresholds.
Related Links
Keywords: Europe, EU, Banking, Macro-prudential Policy, Cross-border Spillovers, Regulatory Arbitrage, Systemic Risk, ESCB, ECB
Featured Experts

Dr. Samuel W. Malone
Sam leads the quantitative research team within the CreditEdge™ research group. In this role, he develops novel risk and forecasting solutions for financial institutions while providing thought leadership on related trends in global financial markets.
Previous Article
EC Adopts Banking Package to Alleviate Impact of COVID-19 PandemicRelated Articles
HKMA Enhances Loan Guarantee Scheme to Alleviate Pressure on SMEs
HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.
EBA Proposes Standards for Supervisory Cooperation Under IFD
EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.
BoE Sets Out Plan to Transform Data Collection from Financial Sector
BoE has set out a three-phased plan to transform data collection from the UK financial sector over the next decade.
BIS Issues Updates on Technology Initiatives on Cross-Border Payments
BIS recently made a couple of announcements with respect to the planned and ongoing work in the area of financial technology.
ESRB Updates List of Macro-Prudential Measures in February 2021
ESRB updated the list of national macro-prudential measures applied by each member state in the European Economic Area.
BoE Survey Shows Positive COVID Impact on Outsourced Banking Services
BoE has set out results of a survey on the impact of COVID-19 events on the use of machine learning and data science.
ECB Issues Opinion on Proposal to Regulate Crypto-Asset Markets in EU
In response to a request from the European Council and Parliament, ECB published an opinion on the proposed regulation on markets in crypto-assets.
APRA Announces Aggregate Committed Liquidity Facility for Banks
APRA announced the updated aggregate amounts for the 2021 Committed Liquidity Facility (CLF) established between the Reserve Bank of Australia (RBA) and certain locally incorporated authorized deposit-taking institutions that are subject to the Liquidity Coverage Ratio (LCR).
ECB and UK Authorities Agree on Post-Brexit Supervisory Cooperation
ECB published supervisory Memorandums of Understanding (MoUs) with UK as well as other European and non-European authorities.
EIOPA Outlines Strategic Supervisory Priorities for Insurance Sector
EIOPA identified business model sustainability and adequate product design as the two EU-wide strategic supervisory priorities.