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19 September 2013

ESRB ASC: The consequences of the SSM for Europe's macro-prudential policy framework

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This report argues for a centralised model of macro-prudential policy within the SSM. The ECB would set the framework and apply the necessary tools, in cooperation with national authorities and to the extent those tools are provided in EU law, mainly the CRD IV.

The ECB would act through its Governing Council, rather than the Supervisory Board, to avoid conflicts between micro- and macro-financial stability. The ESRB would remain advocate of financial stability for the whole of the EU, and should retain effective capability to issue recommendations and warnings about developments in individual EU countries, including those in the SSM. The President of the ECB would have to step down as Chair of the ESRB. 

In its report of October 2012 (No 2/October 2012), the Advisory Scientific Committee (ASC) of the ESRB commented on the SSM and on the necessity to supplement it with the creation of a single resolution mechanism, and later on with a single deposit guarantee scheme.

In this report, the ESRB focuses on the implications of the SSM for the macro-prudential policy framework in Europe, a subject that was already addressed by the High-Level Group (HLG) on the ESRB Review, of which the ASC Chair was a member. The purpose of this report is to make suggestions on matters either not addressed by the HLG or which the ASC consider worthy of further comments.

The remainder of the report is divided into two sections. The first examines how macro-prudential policy could be organised within the SSM. The second looks at the implications of the SSM for the role of the ESRB as the EU body responsible for identifying, monitoring and mitigating systemic risks to the stability of the EU financial system.

Full report

© ESRB - European Systemic Risk Board

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