ECB Publishes Paper on Its Macro-Prudential Policy Framework
ECB published an occasional paper that describes how the financial stability and macro-prudential policy functions are organized at ECB. Macro-prudential policy tasks were conferred on ECB by the Single Supervisory Mechanism (SSM) Regulation. The paper describes the macro-prudential governance framework of ECB in the new institutional setup. After reviewing the concept and origins of systemic risk, it reflects on the emergence of macro-prudential policy in the aftermath of the financial crisis, its objectives, and the instruments in application.
The paper discusses the macro-prudential policy analysis at ECB as well as the selected analytical tools supporting financial stability surveillance and assessment work. The tools are grouped into three broad areas:
- Methods to gauge the state of financial instability or prospects of near-term systemic stress
- Measures to capture the build-up of systemic risk focused on country-level financial cycle measurement and early warning methods
- ECB stress testing framework for macro-prudential purposes
The analytical strengthening has provided ECB with systemic risk identification and assessment tools appropriate for supporting macro-prudential policy calibration, such as the countercyclical capital buffer to address cyclical risks or capital buffers for systemic institutions to address structural risks. While the framework has come a long way since its infancy, there are still a number of challenges and open issues; therefore, work continues on tackling boundary issues with regard to a growing non-bank sector and the associated market-based finance.
Related Link: Occasional Paper (PDF)
Keywords: Europe, EU, Banking, Macro-Prudential Policy, SSM, Systemic Risk, Stress Testing, CCyB, ECB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Amnon Levy
Financial researcher; authority in credit portfolio management and AI/ML, risk-based pricing, climate and credit, CECL/IFRS 9; credit and ALM
Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager
Previous Article
Brazilian Authorities to Implement Regulatory SandboxRelated Articles
BoE Clarifies Approach to Treatment of Payment Holidays on Form PL
BoE published a statistical notice (Notice 2020/9) explaining the approach for treatment of payment holidays on the profit and loss return or Form PL.
BoE Provides Reporting Update on Form AS and Form FV
BoE updated the known issues document for the statistical reporting Forms AS and FV.
BIS Publishes Update on G20 TechSprint Initiative
BIS published an update on the G20 TechSprint Initiative, which was launched in April 2020 and aims to highlight the potential for technologies to resolve regulatory compliance (regtech) and supervisory (suptech) challenges.
FED Announces Capital Requirements for Large Banks
FED announced individual capital requirements for 34 large banks and these requirements go into effect on October 01, 2020.
SRB Publishes Guidance on Implementation of Bail-In Tool
SRB published a set of documents to give operational guidance to banks on implementation of the bail-in tool.
OSFI Provides Update on Implementation of IFRS 17 in Canada
OSFI published a letter that provides an update on the milestones for the implementation of the IFRS 17 standard on insurance contracts.
EBA Provides Clarity on Implementation of Guidance on COVID Reporting
EBA updated the report on the implementation of selected COVID-19 policies.
FSI Note Discusses Challenges Associated with COVID Relief Measures
The Financial Stability Institute (FSI) of BIS published a brief note that examines the supervisory challenges associated with certain temporary regulatory relief measures introduced by BCBS and prudential authorities in response to the COVID-19 pandemic.
BCBS Consults on Principles for Operational Risk and Resilience
BCBS is consulting on the principles for operational resilience and the revisions to the principles for sound management of operational risk for banks.
BoE Updates Template and Definitions for Form ER
BoE updated the reporting template for Form ER as well as the Form ER definitions, which contain guidance on the methodology to be used in calculating annualized interest rates.
