Macroprudential Tools

November 03, 2014

The Bank of England’s Centre for Central Banking Studies (CCBS) and the Joint Vienna Institute (JVI) jointly conducted a one-week course on Macroprudential Tools during October 27-31, 2014. The course featured lecturers from the CCBS, the JVI, and the Oesterreichische Nationalbank (OeNB); those attending came from central banks, ministries of finance, and regulatory agencies.

The course explored the macroprudential policy tools that policymakers can use to mitigate systemic risk along both the time and the cross-sectional dimensions. CCBS lecturers dealt with general financial stability issues, use of contingent claims analysis to assess systemic risk, the Bank of England’s macroprudential policy framework and instruments, and the interaction between monetary and macro policy. JVI economists analyzed in detail such tools as countercyclical capital buffers, caps on loan-to-value (LTV) and debt-to-income (DTI) ratios, dynamic provisioning, and surcharges for systemically important financial institutions (SIFIs); reviewed how external liabilities relate to crisis risk; and discussed the use of capital controls to complement policy. OeNB experts talked about macroprudential policy in the EU.

The lectures on the four macroprudential tools were complemented by workshops. In those on countercyclical capital buffers and on dynamic provisioning, participants used EViews and Excel to calibrate the two tools for different countries. In those on LTV/DTI caps and on surcharges for SIFIs, participants were split into three groups to design optimal policies for dealing with a credit-funded real estate boom and to identify systemically important banks. In a final plenary session, the workshop groups defended their recommendations to the entire class.

To promote peer-to-peer learning, in a special session participants from Croatia, Latvia, Poland, and Slovenia shared their countries’ experiences with macroprudential policy.

Participants appreciated the topical nature of the course, as macroprudential tools are increasingly part of most countries’ policy toolkits. Another area of keen interest is how macroprudential tools can complement other policy areas. In this context, the JVI and the CCBS have agreed to organize a joint event every year, alternating between financial stability and monetary policy as topics. The next joint course will focus on the <link http: training _blank>Interaction of Monetary and Financial Stability Policies and is scheduled for Nov 23-27, 2015; the application deadline is September 13, 2015.

Adam Gersl
Senior Economist, JVI

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