ESRB publishes recommendations for more efficient macroprudential policy in the EU
Today’s global financial markets mean it is often inadequate to implement only national macroprudential measures to efficiently counteract risks and vulnerabilities in the financial system. Some cross-border coordination is also needed to ensure a macroprudential measure has full impact and to avoid negative effects arising from differences in national regulations. The European Systemic Risk Board (ESRB) is today publishing two recommendations as to how macroprudential policy measures can be coordinated to contribute effectively to a stable financial system within the EU. The recommendations are addressed at European institutions and national authorities with responsibility for macroprudential policy within the EU.
"The ESRB recommendations are important, not least in a world with so many cross-border banking operations. If there were no mechanism for reciprocity of one another's measures, there is a risk they would become less effective," says Stefan Ingves.
The first recommendation concerns coordinating the recognition by EU countries of countercyclical buffer rates set by authorities in countries outside Europe (the EEA). The recommendation applies to recognition of countercyclical buffer rates set for exposures to such countries, what capital requirements should apply to banks' exposures to these countries, and how these decisions are communicated to the public.
The second recommendation sets a framework for the assessment of cross-border effects of macroprudential policy measures. It also establishes a mechanism for voluntary reciprocity of other countries' measures, mainly macroprudential policy instruments aimed at exposures to a particular national risk.