07 October 2013

EBF publishes recommendations on macro-prudential oversight

The EBF attaches great importance to the development of a global macro-prudential policy framework to achieve financial stability in the post-crisis regulatory framework. Macro-prudential oversight should complement the micro regulatory reform with the objectives of identifying macro-economic risks that cannot be comprehensively assessed from an individual bank perspective, thereafter measuring them and finally undertaking policy measures that contribute to mitigate the sources of the abovementioned macro-economic risks.

Macro-prudential oversight is therefore central to the success of the entire new regulatory setup. However its design is beset with difficulties that stem mainly from:

• the novelty of using prudential tools instead or in addition to monetary policy;
• the interaction with other prudential measures in the realm of micro-prudential supervision;
• the fact that in certain cases the powers of the vested authorities do not suffice for a clear cut definition of responsibilities and accountabilities; and
• the differences of scope between where systemic risk may arise and the domain where it may become apparent.

Against this challenging background, the EBF is committed to contribute to overcoming these problems and putting in place a macro-prudential framework that helps to achieve the financial stability objective whilst preserving consistency with the rest of the regulatory reform. For that purpose, EBF makes recommendations from the perspective of the EU banking sector in the following areas:

• Institutional arrangements: Responsibility and accountability
• Coordination between Member States
• Transition to the Single Supervisory Mechanism
• Move beyond singularity of focus on capital
• Shift towards simplicity
• Pay attention to overlapping measures
• Activation and de-activation
• Stress test planning
• Communication strategy

Full recommendation

© EBF