Prepared by Thierry Tressel (EURER) and Jianping Zhou (MCMSR).
Regulation (EU) No. 1092/2010 of the European Parliament and of the Council of November 24, 2010.
A non-public recommendation on US dollar funding was also issued.
The Selected Issues Paper to the 2011 euro area Article IV consultation developed a similar argumentation on the importance of having effective macroprudential frameworks in place at the national level (“The European Systemic Risk Board: Effectiveness of Macroprudential Oversight in Europe,” E. Nier and T. Tressel, July 2011).
Policy advices on the CRDIV/CRR were provided in three stages, two non-public letters to EU institutions in 2011 and a public letter in March 2012. Policy advices to ESMA on EMIR were published 08/2012.
Some member states referred to a proportionality rule as a reason not to implement the recommendation.
The ESRB’s role in influencing legislation is limited once the negotiation between the legislation bodies and the EU has started.
The impact on credit supply will depend on the speed at which the buffer is built-up. A fast build-up will presumably be more effective in constraining credit supply, in particular if banks have to resort to costly issuance of equity.
See also evidence reported in Lim, C.H. et al. (2011), “Macroprudential Policy: What Instruments and How to Use Them?” IMF Working Paper No. 11/238.
“Operationalising the selection and application of macroprudential instruments,” CGFS Publications No.48., December 2012.
Borio, C., 2009, “Implementing the macroprudential approach to financial regulation and supervision,” Banque de France, Financial Stability Review 13, the Future of Financial Regulation, September.
See also IMF (2011), “Toward Operationalizing Macroprudential Policies: When to Act?” Chapter 3, Global Financial Stability Report, September 2011.
General considerations are discussed in IMF (2013), “The Interaction of Monetary and Macroprudential Policies,” IMF Board Paper.
During a crisis, market pressures may become the binding constraint. See for example, the discussion at the BoE FPC at the time of the wholesale funding market pressures in September of 2011: http://www.bankofengland.co.uk/financialstability/Pages/fpc/meetings/default.aspx
Optimal risk weights may differ from a microprudential perspective than from a macroprudential one. For example, collateralized short-term assets (such as reverse repo transactions) may appear safe from a microprudential perspective, and therefore attract low capital requirements. But they could be systemically important as decisions not to roll-over the transaction may trigger fire sales of assets by the counterparty of the transaction, which may amplify financial crisis (Morris and Shin, 2008).
For example, an asset class would be defined as sovereign bonds of country A or mortgages on properties of country B.