A macro-prudential supervision framework to enhance financial stability
Wang Zhaoxing, vice chairman of the China Banking Regulatory Commission, feels that macro-prudential policy tools should be a mix of rules and discretion. January 15, 2013 | Wang ZhaoxingThe global financial crisis highlighted the complementary relationship between the macro-prudential and micro-prudential elements of effective supervision. History has shown that neither price stability nor effective supervision at the individual firm level is sufficient to secure financial stability. Macro-prudential supervision has been widely regarded as a new element in the financial stability framework. Macro-prudential analysis, macro-prudential policy toolkit and relevant institutional arrangements have been acknowledged as three key elements of a macro-prudential framework. Macro-prudential analysis, aimed at identifying, assessing and monitoring systemic vulnerabilities and making policy recommendations, is not only about quantitative measurement using models and indicators. Clear, logical and professional judgment should play an important role in systemic risk assessment. This will work effectively only if there is intense joint working by central banks and supervisory agencies to bring together macroeconomic analysis and insights from specific institutions. Macro-prudential policy tools should be a mix of rules and discretion. In the aftermath of the global crisis, a range of tools have been developed, including a counter-cyclical capital buffer aimed at addressing the pro-cyclicality of the financial system and a capital surcharge for systemically important banks to address the too-big-to-fail problem. Macro-prudential institutional set-up should emphasise information sharing and policy coordination. It is important to capitalise on existing institutions and governance structures if they are working well. From this perspective, committee arrangements may be desirable for countries with multiple agencies in charge of financial stability, because it can bring together different perspectives on the sources of systemic risk and contribute to the choice of appropriate policy tools. In recent years, the People’s Bank of China (... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Regulation, Risk and Regulationriskregulation,Risk and Regulation, Regulation,Risk and Regulation, Keywords:Wang Zhaoxing, CBRC, PBoC, CSRC, CIRC, Macro-Prudential Analysis, D-SIB Wang Zhaoxing, CBRC, PBoC, CSRC, CIRC, Macro-Prudential Analysis, D-SIB
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