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
Previous ArticleBrazilian Authorities to Implement Regulatory Sandbox
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.