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

References

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1

We thank Jan Brockmeijer for his guidance. This note and the accompanying IMF Working Paper by the same authors (IMF WP 11/250) benefitted from cooperation with the IMF’s Area Departments, as well as its Legal and Research Departments. Any errors are those of the authors.

2

This paper draws on an accompanying IMF Working Paper by the same authors (IMF WP 11/250). Only very few other papers have analyzed institutional arrangements for macroprudential policy. These include Borio (2009), CGFS (2010), Ingves (2011), Nier (2009, 2011), Nier and Tressel (2011), and Viñals (2011). See also IMF (2011b) on systemic risk measurement and Lim et al (2011) and Borio and Shim (2007) on macroprudential tools.

3

This is in line with IMF (2011a) and FSB, IMF, and BIS (2011). Mitigation of systemic risk also requires use of tools outside of the prudential sphere, which need to be brought into the macroprudential framework.

4

The effectiveness of the ESRB is assessed in IMF (2011c) and Nier and Tressel (2011). The latter paper 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.

6

Since macroprudential decisions will most directly affect the financial sector, rather than the economy as a whole, lobbying to preserve financial sector profits is a much stronger concern for macroprudential policy than it is for monetary policy. 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.

7

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.

8

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.

9

The Financial Policy Committee (FPC) will be chaired by the Governor, and assemble a number of other central bank officials as well as the head of the prudential authority (inside the central bank) and the head of the financial conduct authority (outside the central bank). It will come to sit alongside the existing Monetary Policy Committee (MPC).

11

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.

12

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.

13

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

14

The main example here is the previous model in the United States, where securities brokers were subject to a light-touch regime of supervision by the Securities and Exchange Commission (SEC), even as their systemic importance grew. See Bordo et al. (2011).

15

A case in point is the experience in Ireland, where collaboration in drafting the Financial Stability report was stopped in 2005 (Honohan, 2010).

16

See, for example, Large (2004), “Why We Should Worry about Liquidity,” Financial Times, Nov 11.

17

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.

18

In general, it is useful to define objectives with respect to a specific policy function. Thus for example, where mitigation of systemic risk is the main objective of macroprudential policy, the main objective of monetary policy should remain price stability (IMF, 2010, and Nier, 2011).

19

These elements are present in the new arrangements in Ireland and the United Kingdom.

20

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.

21

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 (Nier 2009 and 2011).

Institutional Models for Macroprudential Policy
Author: Erlend Nier, Mr. Luis Ignacio Jácome, Jacek Osinski, and Pamela Madrid