Premium Members Get 10% Off and Earn Rewards Find Out More
Macroprudential Policy Framework: A Practice Guide
In the wake of the recent global financial crisis and against the backdrop of the ongoing global financial sector reforms, macroprudential policy is being increasingly seen as a “must-do” reform. At the same time, some policy makers are keen on having a better understanding of what it is and how it works before they embark on implementing it. This Guide attempts to meet this need by providing easy-to-comprehend inputs and practical guidance for establishing and operating macroprudential policy framework as appropriate for relevant jurisdictions. While the elements discussed here can be relevant for several jurisdictions, this work is intended to primarily cater to the needs of policy makers in emerging market and developing economies (EMDEs) with the following characteristics: a simple bank-dominated system where other financial sector segments are small but growing; banks are supervised by the central bank; financial sector regulation and supervision is not fully integrated; and availability of quality data is not assured. The Guide begins with an introduction to the concept of macroprudential approach to policy and supervision, discusses the available options for institutional framework, including appropriate mandate, powers, structures, and governance arrangements. Next, it explains the components and objectives of early warning systems, how they can be designed and what makes them effective. The Guide also analyses the available range of macroprudential policy instruments, the risks or stresses that they can address and how these can be deployed. All through, the Guide also flags the challenges that the authorities are likely to encounter while establishing and operating macroprudential policy framework and components. Unique combinations of institutional, policy, and legal frameworks in each jurisdiction make it difficult to apply across-the-board and formulaic macroprudential policy solutions. Therefore, any guidance will need appropriate customization and nuancing to achieve best results in each jurisdiction. Accordingly, while offering practical advice, the Guide encourages the authorities to ask the right questions rather than trying to answer all questions that might be raised. Macroprudential policy can promote financial system stability, but it is not meant to replace other public policies, least of all a jurisdiction’s monetary and microprudential policies.
1116879694
Macroprudential Policy Framework: A Practice Guide
In the wake of the recent global financial crisis and against the backdrop of the ongoing global financial sector reforms, macroprudential policy is being increasingly seen as a “must-do” reform. At the same time, some policy makers are keen on having a better understanding of what it is and how it works before they embark on implementing it. This Guide attempts to meet this need by providing easy-to-comprehend inputs and practical guidance for establishing and operating macroprudential policy framework as appropriate for relevant jurisdictions. While the elements discussed here can be relevant for several jurisdictions, this work is intended to primarily cater to the needs of policy makers in emerging market and developing economies (EMDEs) with the following characteristics: a simple bank-dominated system where other financial sector segments are small but growing; banks are supervised by the central bank; financial sector regulation and supervision is not fully integrated; and availability of quality data is not assured. The Guide begins with an introduction to the concept of macroprudential approach to policy and supervision, discusses the available options for institutional framework, including appropriate mandate, powers, structures, and governance arrangements. Next, it explains the components and objectives of early warning systems, how they can be designed and what makes them effective. The Guide also analyses the available range of macroprudential policy instruments, the risks or stresses that they can address and how these can be deployed. All through, the Guide also flags the challenges that the authorities are likely to encounter while establishing and operating macroprudential policy framework and components. Unique combinations of institutional, policy, and legal frameworks in each jurisdiction make it difficult to apply across-the-board and formulaic macroprudential policy solutions. Therefore, any guidance will need appropriate customization and nuancing to achieve best results in each jurisdiction. Accordingly, while offering practical advice, the Guide encourages the authorities to ask the right questions rather than trying to answer all questions that might be raised. Macroprudential policy can promote financial system stability, but it is not meant to replace other public policies, least of all a jurisdiction’s monetary and microprudential policies.
22.0 In Stock
Macroprudential Policy Framework: A Practice Guide

Macroprudential Policy Framework: A Practice Guide

by Damodaran Krishnamurti, Yejin Carol Lee
Macroprudential Policy Framework: A Practice Guide

Macroprudential Policy Framework: A Practice Guide

by Damodaran Krishnamurti, Yejin Carol Lee

Overview

In the wake of the recent global financial crisis and against the backdrop of the ongoing global financial sector reforms, macroprudential policy is being increasingly seen as a “must-do” reform. At the same time, some policy makers are keen on having a better understanding of what it is and how it works before they embark on implementing it. This Guide attempts to meet this need by providing easy-to-comprehend inputs and practical guidance for establishing and operating macroprudential policy framework as appropriate for relevant jurisdictions. While the elements discussed here can be relevant for several jurisdictions, this work is intended to primarily cater to the needs of policy makers in emerging market and developing economies (EMDEs) with the following characteristics: a simple bank-dominated system where other financial sector segments are small but growing; banks are supervised by the central bank; financial sector regulation and supervision is not fully integrated; and availability of quality data is not assured. The Guide begins with an introduction to the concept of macroprudential approach to policy and supervision, discusses the available options for institutional framework, including appropriate mandate, powers, structures, and governance arrangements. Next, it explains the components and objectives of early warning systems, how they can be designed and what makes them effective. The Guide also analyses the available range of macroprudential policy instruments, the risks or stresses that they can address and how these can be deployed. All through, the Guide also flags the challenges that the authorities are likely to encounter while establishing and operating macroprudential policy framework and components. Unique combinations of institutional, policy, and legal frameworks in each jurisdiction make it difficult to apply across-the-board and formulaic macroprudential policy solutions. Therefore, any guidance will need appropriate customization and nuancing to achieve best results in each jurisdiction. Accordingly, while offering practical advice, the Guide encourages the authorities to ask the right questions rather than trying to answer all questions that might be raised. Macroprudential policy can promote financial system stability, but it is not meant to replace other public policies, least of all a jurisdiction’s monetary and microprudential policies.

Product Details

ISBN-13: 9781464800856
Publisher: World Bank Publications
Publication date: 05/14/2014
Series: World Bank Studies
Pages: 72
Product dimensions: 7.00(w) x 10.00(h) x 0.20(d)

Table of Contents

Acknowledgments vii

Abbreviations ix

Chapter 1 Introduction 1

Chapter 2 Macroprudential Approach to Supervision 3

The Term Macroprudential 3

Scope and Objective 5

Chapter 3 Institutional Framework 9

Mandate and Powers 9

Institutional Structure 10

Governance Arrangements 14

Notes 18

Chapter 4 Early Warning Systems 19

Perimeter of Surveillance 19

Early Detection of Systemic Risk 20

Early Warning Indicators 21

Thresholds and Triggers for Risk Indicators 26

Communication 27

Challenges to Successful Implementation of the Early Warning System 28

Chapter 5 Macroprudential Policy Options 31

Overview 31

Past Use of Macroprudential Instruments and Recent Trends 32

How to Use Macroprudential Policy Instruments 34

Challenges to Successful Implementation of Macroprudential Policy 36

Chapter 6 Conclusion 41

Appendix A Quick Reference Guide: For Implementation of a Macroprudential Policy Framework 45

Appendix B Stability Indicators and Maps: Example from India 49

Appendix C Macroprudential Policy Instruments: A Toolkit 51

References and Further Reading 59

Boxes

2.1 Fallacy of Composition: How Individually Acceptable Behavior Can Contribute to Macroprudential Concerns 6

3.1 Key Desirables for Macroprudential Policy Arrangements 17

4.1 Data and Information Gaps 29

5.1 Basel III: The Foundation for a Macroprudential Framework 33

6.1 Broad Principles for the Design and Operation of Macroprudential Policy 41

Figures

3.1 Central Bank Board as Macroprudential Authority 13

3.2 Committee Structure as Macroprudential Authority 13

4.1 Example of a Heat Map at an Aggregate Level 27

Tables

2.1 The Macro- and Microprudential Perspectives Compared 5

3.1 Which Institution Has Been Given the Macroprudential Mandate? 12

4.1 A Menu of Early Warning Indicators 24

4.2 Possible Layout for a Risk Dashboard 26

5.1 Experience with Macroprudential Tools in Asia 32

5.2 Macroprudential Policy Instruments-Summary 35

5.3 How to Use Macroprudential Instruments-Some Considerations 37

From the B&N Reads Blog
Page 1 of

Customer Reviews