Macroprudential Policy at the ECB: Institutional Framework, Strategy, Analytical Tools and Policies

88 Pages Posted: 23 Jul 2019

See all articles by Vitor Constâncio

Vitor Constâncio

European Central Bank (ECB)

Inês Cabral

European Central Bank (ECB) - Directorate Financial Stability and Supervision

Carsten Detken

European Central Bank (ECB)

John Fell

European Central Bank (ECB)

Jerome Henry

European Central Bank (ECB)

Paul Hiebert

European Central Bank (ECB)

Sujit Kapadia

European Central Bank (ECB); Bank of England

Sergio Nicoletti Altimar

European Central Bank (ECB)

Fatima Pires

European Central Bank (ECB)

Carmelo Salleo

European Central Bank (ECB)

Date Written: July, 2019

Abstract

This occasional paper describes how the financial stability and macroprudential policy functions are organised at the ECB. Financial stability has been a key policy function of the ECB since its inception. Macroprudential policy tasks were later conferred on the ECB by the Single Supervisory Mechanism (SSM) Regulation. The paper describes the ECB’s macroprudential governance framework in the new institutional set-up. After reviewing the concept and origins of systemic risk, it reflects on the emergence of macroprudential policy in the aftermath of the financial crisis, its objectives and instruments, as well as specific aspects of this policy area in a monetary union such as the euro area. The ECB’s responsibilities required new tools to be developed to measure systemic risk at financial institution, country and system-wide level. The paper discusses selected analytical tools supporting financial stability surveillance and assessment work, as well as macroprudential policy analysis at the ECB. The tools are grouped into three broad areas: (i) methods to gauge the state of financial instability or prospects of near-term systemic stress, (ii) measures to capture the build-up of systemic risk focused on country-level financial cycle measurement and early warning methods, and (iii) the ECB stress testing framework for macroprudential purposes.

Keywords: ESRB, financial imbalances, financial regulation, Financial stability, macroprudential, monetary policy, SSM, stress testing, systemic risk

JEL Classification: E37, F36, G20, G28, K23

Suggested Citation

Constâncio, Vitor and Cabral, Inês and Detken, Carsten and Fell, John and Henry, Jerome and Hiebert, Paul and Kapadia, Sujit and Altimar, Sergio Nicoletti and Pires, Fatima and Salleo, Carmelo, Macroprudential Policy at the ECB: Institutional Framework, Strategy, Analytical Tools and Policies (July, 2019). ECB Occasional Paper No. 227, Available at SSRN: https://ssrn.com/abstract=3424161

Vitor Constâncio (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Inês Cabral

European Central Bank (ECB) - Directorate Financial Stability and Supervision ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Carsten Detken

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0049 69 1344 6000 (Fax)

John Fell

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Jerome Henry

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 7614 (Phone)
+49 69 1344 6575 (Fax)

Paul Hiebert

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Sujit Kapadia

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom
020-7601-5507 (Phone)

Sergio Nicoletti Altimar

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Fatima Pires

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Carmelo Salleo

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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