Back Matter
  • 1 https://isni.org/isni/0000000404811396, International Monetary Fund

References

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Appendix I. Supervision of Banking, Securities, Insurance, and Payments in Surveyed Countries

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Appendix II. Use of Selected Macroprudential Instruments in Surveyed Countries

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Appendix III. Summary of Strengths and Weaknesses of Stylized Models

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1/ Relative ranking should be read horizontally.Note: Country-specific circumstances and existence of compensating mechanisms mean that the strengths and weaknesses of real-life models can differ from those indicated in this table.

Appendix IV. Examples of Mechanisms, that can be Applied to Address Some of the Weaknesses of the Models

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Appendix V. Experience in the Recent Crisis (Advanced Europe)

UF1
Sources: Laeven and Valencia (2010), and Claessens, Dell’Ariccia, Igan and Laeven (2010).1/ Failed banks, fraction of total banking assets (%).2/ Announced or pledged amounts, and not actual uptake.3/ Announced or pledged amounts, and not actual uptake. Excludes deposit insurance provided by deposit insurance agencies.

Appendix VI. Experience in the Recent Crisis (World)

UF2
Source: Laeven and Valencia (2010), and Claessens, Dell’Ariccia, Igan and Laeven (2010).1/ Failed banks, fraction of total banking assets (%).2/ Announced or pledged amounts, and not actual uptake.3/ Announced or pledged amounts, and not actual uptake. Excludes deposit insurance provided by deposit insurance agencies.
1

We thank Jan Brockmeijer for his guidance and the Fund’s area departments, the Legal department and the Research department for their cooperation and contributions. Giovanni Dell’Ariccia provided the box on “Monetary and Macroprudential policies: One Authority or Two”. Special thanks to E Philip Davis, Jonathan Fiechter, Don Kohn, Marina, Moretti, Joseph Yam, José Viñals, William White and colleagues from the BIS and FSB for comments and suggestions that helped improve the paper. Simon Townsend provided valuable research assistance.

2

IMF (2011a), discussed by the IMF Board on April 4, 2011.

3

A version of this paper was presented to the IMF Board at an informal session on September 12, 2011.

4

See IMF (2011b) and references therein on risks assessments. See Borio and Shim (2007), CGFS (2010), Galati and Moessner (2010) and Lim et al (2011) on instruments.

5

Recent papers include Ingves (2011), Nier (2009, 2011), Nier and Tressel (2011), and Viñals (2011).

6

FSB, IMF, and BIS (2011), “Macroprudential Tools and Frameworks,” Update to G-20 Finance Ministers and Central Bank Governors (February).

7

The subject of what constitutes macroprudential policy is discussed further in IMF (2011a). Mitigation of systemic risk also requires use of tools outside of the prudential sphere, which need to be brought into the macroprudential framework.

8

Indeed, mitigation of systemic risk has long been recognized as one of the (two) objectives of financial regulation and supervision, see Goodhart and Schoenmaker (1995), the other being protection of consumers when there is asymmetric information between the issues and buyers of financial claims. See also Nier (2011) for further discussion.

9

The country case studies include Australia, Brazil, Canada, Hong Kong SAR, Iceland, Ireland, Korea, Mexico, Peru, Serbia, the United Kingdom, and the United States, and are available on request.

11

The sample of countries that responded to the IMF survey includes Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Chile, China, Colombia, Czech Republic, Finland, France, Germany, Greece, Hong Kong SAR, Hungary, India, Indonesia, Ireland, Italy, Japan, Jordan, Lebanon, Malaysia, Mexico, Mongolia, Netherlands, New Zealand, Nigeria, Norway, Paraguay, Peru, Philippines, Poland, Portugal, Romania, Russian Federation, Serbia, Singapore, Slovakia, South Africa, Spain, Sweden, Switzerland, Thailand, Turkey, the United Kingdom, the United States, and Uruguay. The survey was also answered by the European Central Bank (ECB).

12

In almost all countries, monetary and financial stability is ultimately the responsibility of the government. But governments often find that delegation of specific policy functions to agencies that are given mandates and powers to achieve the function can be the best way of delivering on this responsibility.

13

Even when the central bank also has some statistics collection functions, there may be legal firewalls so that the data collected for statistical purposes may not be passed on in any form that would permit the identification of individual firms.

14

See for example the recent legal amendment in Hong Kong SAR to enable the securities regulator access to information on short positions.

15

The median BCP ratings for core principle 1, sub-principe1.3 on legal framework, which includes the power to set prudential rules indicates that most supervisors are compliant or largely compliant, although these ratings are often lower in emerging economies.

16

Crowe et al (2011) provide discussion of LTV ratios as a tool to contain housing booms.

17

As noted by the Netherlands FSAP, see IMF (2011d), and Nier and Tressel (2011). The latter paper provides some further discussion in the context of European Union (EU) proposals for a new capital requirements directive (CRD IV).

18

There is also Brazil’s National Monetary Council, which issues prudential regulations.

20

Nier and Tressel (2011) also offer a precursor of the seven national models proposed in this paper, as well as a brief discussion of their strengths and weaknesses, in the context of the overall arrangements in the EU.

21

These draw on IMF (2011a).

22

Inter-agency rivalry can lead one agency to be reluctant to share information since it wants to hold on to its “power.” Within an organization, such rivalry is between departments and can be addressed by management, through incentives and mechanisms to foster cooperation. However, confidentiality rules may hinder the free flow of information even in the case of an integrated structure.

23

Goodhart and Schoenmaker (1995), and Nier (2009). These incentives can lead the central bank to demand high capital and liquidity buffers. Standalone supervisory agencies can also have strong incentives, especially when their mandates emphasize stability objectives.

24

These benefits pertain to the mitigation of risks both in the time dimension and in the structural dimension. The model facilitates coordination between macroprudential and microprudential policy in the mitigation of aggregate (cyclical) risks. It also facilitates coordination in the mitigation of risks to the financial system that can arise from the failure of individual components. In particular, both the prudential control of systemically important institutions and the oversight of systemically important infrastructure can occur without the need for interagency coordination between separate macro and microprudential regulators (for institutions) or between the central bank and a separate securities regulator (for infrastructure).

25

This is in particular when the central bank also conducts monetary policy in an independent manner. Historically this has led some governments to separate monetary and prudential policies, as monetary independence was strengthened.

26

Igan and others (2009) analyze lobbying activity of mortgage lenders ahead of the crisis and provide suggestive evidence that the political influence of the financial industry had an influence on financial stability. Kroszner and Strahan (1999) show that special interests theory can explain the design and timing of bank deregulation in the United States.

27

Financial subsidiaries of these holding companies, such as banks, insurance companies and brokers continue to be supervised by specialized agencies, unless they are state-chartered members of the Federal Reserve System.

28

This can be a useful device in countries where the number of banks is large (Nier, 2009). Designation can then focus the central bank’s supervisory attention on those institutions that are individually systemically relevant. In addition the central bank may be given regulatory control over a larger set of institutions that are collectively important in a manner that allows the central bank to calibrate countercyclical measures, such as a dynamic capital buffer.

29

Mitigation of systemic risks in the context of the clearing and settlements of financial transactions is particularly important, especially in more market-based financial systems. In the new model in the United Kingdom, oversight over clearing and settlement systems has been assigned to the Bank of England, expanding its existing role in payments system oversight.

30

In the United States, this is mitigated since all agencies will have access to data collected by the new Office of Financial Research (OFR).

31

In principle, this is a lesser concern for models 1 and 2, since in these models the central bank governor chairs a committee whose decisions will often be implemented by the central bank supervision department, rather than by a separate agency.

32

In some countries, conduct of business and securities market regulation are institutionally integrated with the prudential supervision of financial institutions, forming FSA-type agencies. In some countries, prudential and conduct supervision of institutions are integrated, while there is separation along sectoral lines (banking, insurance securities). Finally, conduct and securities supervision can be separate from the prudential regulator, e.g., Australia.

33

Bordo and others (2011) examine the experience of Canada.

35

See, for example, Large (2004), “Why We Should Worry about Liquidity”, Financial Times, Nov 11. Additional coordination problems can arise when consumer protection objectives and conduct of business functions are integrated with the separate prudential regulator. Such a combination can distract attention from systemic risk objectives on the part of the prudential regulator, especially in long periods of calm.

36

The issue was examined in detail by the Turkey FSAP Update.

37

For example, a secondary objective could be to ensure that macroprudential action does not unduly impair the capacity of the system to contribute to balanced growth.

38

In general, it is useful to define objectives with respect to a specific policy function. Thus for example, when mitigation of systemic risk is the main objective of macroprudential policy, this does not take away that the main objective of monetary policy should remain price stability (IMF, 2010, and Nier, 2011).

39

The responsibilities of potentially separate macroprudential and crisis management committees need to be clearly delineated. There may need to be close coordination between both committees in crisis times, e.g., when there is a need to release countercyclical measures, such as dynamic capital buffers which would remain the responsibility of the macroprudential committee.

40

To avoid crisis management and resolution functions becoming unduly politicized, involvement of the treasury in this policy area is usefully balanced by a role of independent agencies, such as the central bank or a separate resolution authority. Establishment of special resolution regimes and dedicated resolution funds can diminish the need for a routine involvement of the treasury even if it will need to be involved whenever resolution decisions involve the commitment of public funds (Nier 2009 and 2011).