BIS: Operationalising the selection and application of macro-prudential instruments

03 December 2012

The Committee on the Global Financial System (CGFS) has published a report which provides practical guidance for policymakers on how macro-prudential instruments should be chosen, combined and applied.

This report - prepared by a Working Group chaired by José-Manuel González-Páramo, formerly of the European Central Bank - aims to help policymakers in operationalising macro-prudential policies. Specifically, it identifies three high-level criteria that are key in determining the selection and application of macro-prudential instruments:

• the ability to determine the appropriate timing for the instrument's activation or deactivation;
• the instrument's effectiveness in achieving the stated policy objective; and
• the instrument's efficiency in terms of a cost-benefit assessment.

In trying to operationalise these criteria, this report proposes a number of practical tools. First, to help determine the appropriate timing for the activation and deactivation of instruments, it lays out stylised scenarios. Their identification is facilitated by two alternative approaches that seek to link systemic risk analysis and instrument selection. Second, to support the evaluation of the effectiveness and efficiency of macro-prudential tools for a range of macro-prudential instruments, the report proposes "transmission maps" - stylised presentations of how changes in individual instruments are expected to contribute to the objectives of macro-prudential policy.

Press release

Full paper

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