Important Policy Papers on Macroprudential Policy
| Date Published | 9/16/2013 |
| Author | Marja Hoek-Smit |
| Theme | Housing Finance Policy |
| Country |
Important Policy Papers on Macroprudential Policy
September 16, 2013
The crisis has underscored the costs of
systemic instability at both the national and the global levels and highlighted
the need for dedicated macroprudential policies to achieve financial stability.
The IMF has developed a series of papers that provide a framework to inform the
IMF’s advice on macroprudential policy.
Importantly,
one of the papers focuses on the countercyclical capital buffer (CCB). CCB was
proposed by the Basel committee to increase the resilience of the banking
sector to negative shocks. The interactions between banking sector losses and
the real economy highlight the importance of building a capital buffer in
periods when systemic risks are rising. Basel III introduces a framework for a
time-varying capital buffer on top of the minimum capital requirement and
another time-invariant buffer (the conservation buffer). The CCB aims to make
banks more resilient against imbalances in credit markets and thereby enhance
medium-term prospects of the economy—in good times when system-wide risks are
growing, the regulators could impose the CCB which would help the banks to
withstand losses in bad times. The paper draws on case studies from Ireland,
Spain among others.
Links:
Key Aspects of Macroprudential Policy - Background Paper
Key Aspects of Macroprudential Policy
Implementing Macroprudential Policy - Selected Legal Issues