TARGET GROUP | Mid-level to senior officials from central banks, regulatory agencies and ministries of finance or economics who are involved in financial stability and macroprudential policy.
DESCRIPTION | The stability of the financial system as a whole depends crucially on the evolving interlinkages between the financial system and the real economy, as well as on the network of interconnections between financial institutions, and the strategic inter-actions and externalities that these linkages create. Consequently, there is now a grow-ing consensus among policymakers of the need to develop a proper macroprudential ap-proach to financial stability policy. The crisis has led to a great deal of thought about what this type of macroprudential policy could realistically achieve, what tools and techniques could be used, and how it could interact with central banks’ other responsi-bilities.
This one-week course will explore the tools that policymakers can use for such macro-prudential policy. The course will focus on designing a proper macroprudential mandate and operating framework, and analyze the links between macroprudential policy, mone-tary policy and microprudential supervision in various institutional set-ups. It will also cover international aspects of macroprudential policy.
It will then proceed to analyze in detail various macroprudential instruments. Along the time dimension of systemic risk, the course will address how to properly use instru-ments, such as countercyclical capital buffers, time-varying risk weights, limits on LTV/LTI, leverage ratio or through-the-cycle provisioning, in a countercyclical way. In this regard, it will also present indicators, such as credit cycle variables and indicators of excessive risk taking that can be used to calibrate the tools. In this context the course will also look at how these macro prudential tools sit alongside micro-prudential capital requirement and prudential measures for the housing market. Within the cross-sectional dimension of systemic risk, the course will review the SIFI identification meth-odology and the use of SIFI surcharges. In addition the course will also look at liquidity risk and approaches to address this using liquidity and funding adequacy tools from a micro prudential perspective or from a systemic perspective. The course will close with a general discussion on possibilities and limits of macroprudential policy.
The course requires a high level of participation. Several participants may be invited to give presentations in their fields of expertise. The seminar will be supplemented by practical sessions that will explore several techniques in greater depth.