## _wp11250 ## Source details **Canonical URL:** [_wp11250](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2011/_wp11250.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2011/_wp11250.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2011/_wp11250.pdf.json) --- ### I. Introduction and purpose - Countries are reviewing institutional frameworks for financial stability to support the development of a macroprudential policy function in response to the high cost of the recent financial crisis. - Paper builds on IMF (2011a) and responds to the IMF Board recommendation that “more needs to be done to establish criteria for assessing the effectiveness of different institutional setups for macroprudential policies.” - Prior literature emphasis: recognizing/assessing systemic risks and identifying instruments; less attention on institutional design. - Definition: Macroprudential policies are those policies that use primarily prudential tools to limit systemic or system-wide financial risks. - Objectives: - Chart global landscape of financial stability arrangements and assess presence of macroprudential framework elements (institutions, mandate, powers, accountability). - Identify stylized institutional models, set assessment criteria, examine strengths/weaknesses, explore improvement mechanisms. - Provide guidance for designing macroprudential institutional arrangements without prescribing a single preferred model; recognize country-specific circumstances. - Analysis draws on: 2010 IMF survey and 12 country case studies (Australia, Brazil, Canada, Hong Kong SAR, Iceland, Ireland, Korea, Mexico, Peru, Serbia, the United Kingdom, the United States). ### II. Key desirables for macroprudential policy arrangements (Box 1) - General principles: - The central bank should play an important role in macroprudential policymaking. - Avoid complex and fragmented regulatory structures. - Treasury participation is useful; a leading role poses risks. - Systemic risk prevention and crisis management are distinct functions and should have separate organizational arrangements. - Macroprudential frameworks should not compromise autonomy of other policy areas. - Arrangements must consider country-specific circumstances. - Identification, analysis, monitoring of systemic risk: - Mechanisms for effective sharing of all information needed to assess systemic risks should be in place. - At least one institution involved in assessing systemic risk should have access to all relevant data and be the one with best expertise. - Mechanisms are needed to challenge dominant views of one institution. - Timely and effective use of macroprudential tools: - Institutional mechanisms should support willingness to act and reduce delay in policy actions. - A lead macroprudential authority should be identified with clear mandate and powers that harness incentives of existing institutions. - Mandate must be matched by sufficient powers, including to initiate use of prudential tools; mechanisms to expand powers when needed. - Mandate should give primacy to mitigation of systemic risk but include secondary objectives to account for costs/trade-offs. - Proper accountability and transparency should guard against overly restrictive or inadequate policy without unduly compromising effectiveness. - Coordination across policies: - Institutional integration of financial regulatory functions within the central bank can support coordination with monetary and microprudential policy but requires safeguards. - Where separation of policy decisions and control over tools exists, legal frameworks should assign formal powers to recommend or direct action by other policymakers. - Distributed decision making: coordinating committees are useful but may not be sufficient to overcome collective action and accountability problems. ### III. Snapshot of existing institutional arrangements - Data sources: 2010 IMF survey and 12 country case studies. - Institutional structures and supervision: - For 31 out of the 50 countries responding to the IMF survey, the central bank is responsible for banking supervision. - Among emerging markets, this setup is in place in two‑thirds of the surveyed countries. - For advanced countries it is in just over one‑half. - The other 19 countries: multiple agencies (including banking and securities regulators) have supervisory responsibilities; arrangements vary from integration outside the central bank to multiple agencies. - In virtually all countries, oversight of payment systems is conducted by the central bank. - Committees and coordination: - Majority of countries have multi‑agency set‑ups, but less than one‑third have committees that coordinate among central bank and other regulators. - Financial stability committees typically include central bank and supervisory authorities, often include fiscal authority (e.g., MOF or secretary of the treasury). - Financial stability committees are more prevalent where banking supervisor is separate from the central bank, but also exist where monetary and banking supervision are integrated (examples: new model in Malaysia and the United Kingdom). - Some countries lack a de jure committee despite multiple oversight agencies (examples: Iceland, Korea, Peru, Switzerland). - Role of executive branch in committees: - Where a financial stability committee exists, the executive branch (fiscal authority) has a leading role in half of these cases. - In about half of countries with a committee, the fiscal authority chairs it. - Many recently established committees—particularly in emerging markets—have the executive branch chairing, reflecting crisis management responsibilities. - Many committees are based on executive decree or MOU rather than statute; as non‑statutory bodies they often only coordinate and members retain powers. ### IV. Recent trends in institutional change (Box 2) - Two clear trends: - Movement towards more integrated institutional frameworks in some countries. - Popularity of financial stability committees, often chaired by executive branch or central bank representative. - Regional patterns: - Advanced economies, particularly Europe, have seen integration of prudential supervision into the central bank (examples: “twin peaks” in the Netherlands; conduct supervision separate in Belgium, France, United Kingdom; Ireland: all supervision by central bank). - United Kingdom: created a Financial Policy Committee (FPC) within central bank, chaired by the governor and including government representation. - United States: government chairs the Financial Stability Oversight Council (FSOC), separate from the Federal Reserve. - Emerging markets: new committees with macroprudential responsibilities; no clear chairing tendency (Chile and Mexico: chaired by MOF; Turkey: deputy prime minister; Malaysia and Thailand: within central bank, chaired by governor). - Legal constraints: - Existing legislation (central bank mandates, consumer protection, constitutional protections) constrain reforms, especially in Latin America (example: Chile — governor not legally a member of the financial stability committee). ### V. Mandates, tool usage, and constraints (Box 2 continued) - Mandate prevalence and assignment: - "A macroprudential mandate is more common in emerging markets and is most often assigned to the central bank, although it is often only implicit." - "In one half of the emerging markets in the sample, there is a macroprudential policy mandate." - "This responsibility is assigned to central banks in 19 of the 21 countries." - In most cases mandate is not formal but rests on central bank roles (payment systems, lender‑of‑last‑resort) or on supervisory institutions' roles. - Correlation between mandate and tool use: - "Fourteen countries that reported not having an institution(s) with a macroprudential mandate, nonetheless reported using instruments to address systemic risks during the last decade." - "10 countries that reported having an institution(s) with a macroprudential mandate did not use any such instruments." - Vast majority of countries reporting use of macroprudential tools are emerging markets. - Motivation in emerging markets: previous systemic banking crises preceded by “boom and bust” cycles in lending and leverage. - Constraints on fulfilling mandates: - Limits on information gathering: supervisors’ powers typically restricted to regulated institutions; a few central banks can collect information directly from firms (examples: Brazil, Korea). - Limits on prudential rule flexibility: where rules are embedded in law (e.g., minimum capital adequacy requirement set at 8 percent), supervisors often cannot adjust requirements like sectoral risk weights or LTV ratios (common in Latin America and Europe; examples: Finland, France, Netherlands). - Regulatory perimeter expansion typically requires legislation and government involvement. - Financial stability committees generally do not have power to direct individual regulatory authorities; very few (U.K. FPC, U.S. FSOC, Mexico’s FSC) have statutory powers to recommend or direct macroprudential policies. ### VI. Accountability and communication (Box 2) - Accountability mechanisms: - Most countries have accountability for central banks and supervisors; formal macroprudential accountability is rare. - Examples developing such mechanisms: Ireland, Mexico, United Kingdom, United States (often involve accountability to public and Parliament). - United Kingdom: FPC required to publish a financial stability report (FSR) and a record of decisions/deliberations. - United States: legislation requires publication of an annual report and testimony to Congress. - Communication practices: - Most countries communicate systemic risk assessments/policies mainly via an FSR. - Among 12 country case studies, 9 countries issue FSRs. - Risk warnings are publicized in only two cases; only one country publishes warnings regularly. - Several countries developing communication frameworks for macroprudential policies. ### VII. Stylized institutional models and distinguishing dimensions - Five key distinguishing dimensions: 1. Degree of institutional integration between central bank and regulatory/supervisory functions (full, partial, nonexistent). 2. Ownership of macroprudential mandate (central bank, committee related to central bank, independent committee, multiple agencies). 3. Role of the treasury (active, passive, nonexistent). 4. Degree of separation between decision making and control over instruments. 5. Whether a coordinating committee exists. - Typology: seven models plus a supranational model (ESRB). Degrees of integration and ownership condition observed models; dimensions not fully independent. - Table — selected features of stylized models (as presented): - Model 1 - Degree of integration: Full (at a central bank) - Ownership: Central bank - Role of MOF/treasury/government: No (Active*) - Separation of policy decisions and control over instruments: No - Model 2 - Degree of integration: Partial - Ownership: Committee “related” to central bank - Role of MOF/treasury/government: Passive - Separation of policy decisions and control over instruments: In some areas - Model 3 - Degree of integration: Partial - Ownership: Independent committee - Role of MOF/treasury/government: Active - Separation of policy decisions and control over instruments: Yes - Model 4 - Degree of integration: Partial - Ownership: Central bank - Role of MOF/treasury/government: No - Separation of policy decisions and control over instruments: In some areas - Model 5 - Degree of integration: No - Ownership: Multiple agencies - Role of MOF/treasury/government: Passive - Separation of policy decisions and control over instruments: No - Model 6 - Degree of integration: No (Partial*) - Ownership: Multiple agencies - Role of MOF/treasury/government: Active - Separation of policy decisions and control over instruments: No - Model 7 - Degree of integration: No - Ownership: Multiple agencies - Role of MOF/treasury/government: No (Active*) - Separation of policy decisions and control over instruments: No - Model R 1 (regional/supranational) - Degree of integration: No - Ownership: Committee (multinational; regional) - Role of MOF/treasury/government: Passive (European Commission; Economic and Financial Committee) - Separation of policy decisions and control over instruments: Yes ### VIII. Assessment approach and Model evaluations (Section 5 and Boxes 3–4) - Assessment steps: - Present high‑level requirements for an effective institutional model. - Assess strengths/weaknesses of models against criteria. - Discuss mechanisms to address weaknesses. - Desirable capabilities of a model: - Effective identification, analysis, monitoring of systemic risk (access to information; use of expertise). - Timely and effective use of macroprudential tools (strong mandate/powers; willingness to act; accountability). - Effective coordination across policies while preserving autonomy. - Model 1 (full integration) — strengths: - Facilitates information flow and access to microprudential and market data; enables top‑down and bottom‑up analysis (e.g., stress tests). - Leverages central bank expertise: monetary policy, payment systems, lender of last resort, research. - Clear mandate and accountability within single agency; strong incentives to act due to costs of inertia and central bank independence. - Coordination across macroprudential, monetary, microprudential policy internalized; decision maker controls most relevant tools. - Model 1 — weaknesses: - Lack of internal mechanisms to challenge “house views”; entrenchment risk. - Large multi‑functional organization is harder to manage; data/expertise integration challenging. - Concentration of power in unelected central bank officials; few safeguards against overly aggressive use of tools. - Reputational and mission conflicts: failures in supervision can undermine monetary credibility; conduct/consumer protection duties can distract. - Models 2–4 (twin peaks variants) — overview: - Twin peaks: central bank retains prudential functions; conduct/securities regulation is separate. - Examples: United Kingdom (FPC within Bank of England; FCA outside), United States (Fed supervises systemically important holding companies; FSOC designates firms), Belgium, Netherlands. - Model 2 (central bank macroprudential committee; example: UK FPC) — strengths: - Strong access to prudential data/expertise; clearer accountability; central bank incentives transfer to committee; reduces reputational spillovers vs. full integration. - Allows treasury participation as observer or voting member without undermining monetary independence. - Model 2 — weaknesses: - Concentration of power requires unambiguous mandate and strong accountability. - Potential reduced coordination with monetary policy relative to full integration (see Box 3 game‑theoretic trade‑offs). - Separation of conduct/securities authority outside central bank can limit control over tools; bridging mechanisms required. - Model 3 (independent committee chaired by treasury) — implications: - Information fragmentation; potential decision delays; accountability challenges with multiple key players; separation of decision and control over tools requires strong compensating mechanisms. - Strong treasury role can garner political support but risks short‑term political pressures and may weaken operational independence. - Model 4 (like Model 1 but with separate conduct/securities authority and no formal bridge) — implications: - Lack of bridge can impede access to retail market and shadow‑banking information; mandates emphasizing financial stability in separate regulators can help but may require additional mechanisms. - Models 5–7 (strong institutional separation) — strengths: - Keeps agencies focused on core objectives; distinct accountability; reduces risk of single‑institution dominance. - Models 5–7 — weaknesses: - Impeded flow of microprudential data to central bank; harder to combine macroeconomic and institution‑specific expertise. - Risk of regulatory gaps where entities grow systemic without tightened supervision (example: pre‑crisis U.S. brokers and money market funds). - Coordination challenges: conflicting messages, diluted accountability, delays in action, suboptimal policy mixes. ### IX. Game‑theoretic trade‑offs: Monetary vs. Macroprudential authority (Box 3) - Instruments are cross‑effective: interest rates affect financial‑market behavior; macroprudential policy affects aggregate demand via cost of credit. - Coordination vs. credibility trade‑off: - Separate agencies can produce Nash outcomes that are suboptimal relative to coordinated solution. - Joint authority can undermine credibility of monetary policy if objectives conflict (e.g., fighting inflation vs. encouraging risk‑taking). - Optimal institutional structure depends on balance of coordination needs and credibility concerns, and on information/talent constraints. - Treasury involvement: - Excluding treasury can be costly when legal/fiscal action is needed to mitigate systemic risk; including treasury can improve cooperation but risks political influence. ### X. Empirical evidence and mechanisms to address model weaknesses (Box 4) - Empirical challenges: institutional structure is one of many factors; crises are rare tail events; institutional variation is subtle. - Cross‑country patterns suggest integrated supervisory arrangements appear associated with milder crisis outcomes on average and seem to attenuate vulnerabilities related to strong capital inflows. - Regression evidence (Advanced Europe): coefficients and significance reported (Dummy: Supervisor within CB; Current Account Surplus; Dummy*Current Account) with Observations and R‑squared values; significance markers: *** p<0.01, ** p<0.05, * p<0.1. - Observations: 16 | 14 | 14 | 16 | 14 | 14 - R‑squared: 0.429 | 0.444 | 0.275 | 0.641 | 0.715 | 0.476 - Mechanisms to address weaknesses (selected highlights): - Coordinating committee: facilitate information exchange, consensus, spot supervisory gaps, coordinate communication; limitation: may not fix accountability/incentive problems. - Discipline independent use of powers: legal mandates, accountability frameworks (ex ante strategy, deliberation records, ex post assessments), publication requirements (examples: Ireland, UK FPC, US). - Compensate separation of decisions and tools: vest binding powers over specific instruments with macroprudential authority; nonbinding “comply or explain” recommendations; membership of implementing agencies on decision bodies; route recommendations to legislature (ESRB → European Commission/Parliament). - Address delayed action: voting rules (simple or qualified majority), strong central bank voice on committees, distinguish macroprudential setup from crisis management, congressional testimony requirements (US). - Improve cooperation: formal coordinating committee, legal arrangements for public warnings/recommendations, remove legal impediments to information sharing, joint databases (example: Australia). - Conclusion emphasis: - Evidence is suggestive; “one size does not fit all.” - Integrated supervisory arrangements linked with milder crisis outcomes on average. - Institutional choices must account for local conditions, legal frameworks, political economy, and transitional costs. - Compensating mechanisms (coordination, accountability, legal powers, voting rules, targeted instrument authority) can mitigate weaknesses. ### XI. Design guidance and general recommendations (Box 5 and synthesis) - Factors affecting choice of model: available resources; monetary policy regime; size/complexity of financial system; history of institutional structures; legal traditions; political economy. - General lessons: - Central bank should play an important role to harness incentives, expertise, and ensure coordination with monetary policy, liquidity provision, payments oversight. - Avoid complex and fragmented regulatory structures; use institutional bridges when supervision is outside central bank. - Treasury participation is useful but a dominant role poses risks of delayed countercyclical action. - Separate systemic risk prevention from crisis management; treasury more natural crisis manager. - Specific institutional design recommendations: - Ensure mechanisms for effective information sharing and data access; at least one institution with full access and best expertise. - Assign macroprudential mandate to a single accountable institution or decision committee; complement mandate with powers to obtain information and initiate regulatory action. - Guard against over‑restrictive policy via mandates with secondary objectives and strong accountability/transparency (publication of strategy, records, ex post assessments). - Where separation of decision and instruments exists, design legal powers to recommend/direct with “comply or explain,” carve out specific instruments, or require consultation and cross‑membership. - Use voting rules to limit blocking; ensure central bank has a strong voice; establish separate crisis management committee chaired by treasury if needed. - Open questions for further study: - Country‑specific conditions shaping institutional choice. - Trade‑offs between precision and flexibility of mandates and powers. - Trade‑offs between policy autonomy and accountability. - Mechanisms to ensure information flows and address incentive problems under institutional separation. ### XII. Appendices — selected survey and empirical data highlights - Appendix I (supervisory assignments): preserves cross‑country supervisory labels; example entry: Argentina: CB / S / I / CB. - Appendix II (use of selected macroprudential instruments): - Instruments surveyed: caps on LTV ratios; caps on debt‑to‑income ratios; countercyclical/dynamic provisioning; ceiling on credit growth; countercyclical/time‑varying capital requirements. - Noted pattern: "Fourteen countries that reported not having an institution(s) with a macroprudential mandate, nonetheless reported using instruments..." and "10 countries that reported having an institution(s) with a macroprudential mandate did not use any such instruments." - Source: 2010 MCM survey. - Appendix III (summary strengths/weaknesses of stylized models): - Relative rankings presented with symbols (, , , , etc.) across multiple criteria (information flow, expertise use, accountability, coordination with monetary/fiscal policy, concentration of power, reputational cross‑over). - Note: relative ranking should be read horizontally; country circumstances and compensating mechanisms can alter outcomes. - Appendices V and VI (crisis experience charts and data sources): - Crisis depth measures from Laeven and Valencia: (i) failed banks (fraction of banking system assets of failed banks); (ii) capital support announced/pledged; (iii) guarantees announced/pledged. - Observed country orderings and distinctions between "within Central Bank" and "outside Central Bank" preserved in source figures. *Source: _wp11250 (IMF staff paper content provided in the source PDF).* ### References ............................................................................................................. ### _wp11250 - References ### I. Introduction and purpose - Countries are reviewing institutional frameworks for financial stability to support the development of a macroprudential policy function in response to the high cost of the recent financial crisis. - The paper builds on IMF (2011a) and responds to the IMF Board recommendation that “more needs to be done to establish criteria for assessing the effectiveness of different institutional setups for macroprudential policies.” - Emphasis of prior literature has been on recognizing and assessing systemic risks and identifying instruments; less attention has been paid to the design of institutional setups for macroprudential policy. - Macroprudential policies are defined here as those polices that use primarily prudential tools to limit systemic or system-wide financial risks. - Objectives of the paper: - Chart the existing landscape of financial stability arrangements worldwide and assess the extent to which elements of a macroprudential policy framework (institutions, mandate, powers, accountability) are in place. - Identify stylized institutional models, set criteria for assessing models, examine strengths and weaknesses, and explore mechanisms to improve existing setups. - Provide basic guidance for design of macroprudential institutional arrangements without prescribing a single “preferred” model; recognize country-specific circumstances. - Analysis draws on the 2010 IMF survey and 12 country case studies (Australia, Brazil, Canada, Hong Kong SAR, Iceland, Ireland, Korea, Mexico, Peru, Serbia, the United Kingdom, and the United States). ### II. Key desirables for macroprudential policy arrangements (Box 1) - General 1. The central bank should play an important role in macroprudential policymaking. 2. Complex and fragmented regulatory structures are unlikely to be conducive to successful mitigation of systemic risk and should therefore be avoided. 3. Participation of the treasury in the policy process is useful, but a leading role poses risks. 4. Systemic risk prevention and crisis management are different policy functions that should be supported by separate organizational arrangements. 5. Macroprudential policy frameworks should not become a vehicle to compromise the autonomy of other established policies. 6. Arrangements need to take account of country-specific circumstances. - Provide for effective identification, analysis, and monitoring of systemic risk 7. Mechanisms for effective sharing of all information needed to assess systemic risks should be in place. 8. At least one institution involved in assessing systemic risk should have access to all relevant data and information. It should be the one that disposes of the best existing expertise to assess systemic risk. 9. Mechanisms are needed to challenge dominant views of one institution. - Provide for timely and effective use of macroprudential policy tools 10. Institutional mechanisms should support willingness to act against the buildup of systemic risk and reduce the risk of delay in policy actions. 11. A lead macroprudential authority should be identified and be provided with a clear mandate and powers, in a manner that harnesses incentives of existing institutions to mitigate systemic risk. 12. The mandate needs to be matched by sufficient powers, including to initiate the use of prudential tools to address systemic risk. Mechanisms should be established to expand powers when needed. 13. The mandate should give primacy to the mitigation of systemic risk, but include secondary objectives to ensure that the policymaker takes into account costs and trade-offs. 14. To guard against overly restrictive or inadequate policy, proper accountability and transparency need to be put in place, without unduly compromising the effectiveness of macroprudential policy. - Provide for effective coordination across policies to address systemic risk 15. Institutional integration of financial regulatory functions within the central bank can support effective coordination of macroprudential policy with monetary as well as microprudential policy, but also requires safeguards. 16. Where institutional separation of policy decisions and control over policy tools cannot be avoided, the legal framework needs to assign formal powers to recommend or direct action of other policymakers. 17. Where there is distributed decision making among several agencies, establishing a coordinating committee is useful, but may not necessarily be sufficient to overcome collective action and accountability problems. ### III. Existing institutional arrangements across countries: snapshot - Data sources: 2010 IMF survey (list of responding jurisdictions provided in the source) and 12 country case studies. - Institutional structures and supervision - For 31 out of the 50 countries responding to the IMF survey, the central bank is responsible for banking supervision. - Among emerging markets, this setup is in place in two-thirds of the surveyed countries. - For advanced countries it is in just over one-half. - In the other 19 countries, multiple agencies (including banking and securities regulators) have financial supervisory responsibilities, with institutional arrangements varying from integration (other than payment system oversight) outside the central bank to multiple agencies. - In virtually all countries, the oversight of payment systems is conducted by the central bank. - Committees and coordination - Although the majority of countries have multi-agency set-ups, less than one-third have committees that play a coordinating role among the central bank and other regulatory authorities. - Financial stability committees typically comprise the central bank and supervisory authorities, and often include a fiscal authority (e.g., minister of finance (MOF) or secretary of the treasury). - Financial stability committees are more prevalent in countries where the banking supervisor is separate from the central bank, but they also exist in countries where monetary and banking supervisory authorities are closely integrated (examples cited: the new model in Malaysia and the United Kingdom). - There are countries where a committee does not exist de jure despite multiple agencies having responsibility for financial sector oversight (examples cited: Iceland, Korea, Peru, and Switzerland). - Role of the executive branch in committees - Where a financial stability committee exists, the executive branch (fiscal authority) has a leading role in half of these cases. - In about half of the countries with a financial stability committee, the executive branch’s fiscal authority (typically the MOF or the secretary of the treasury) chairs the committee. - Many recently established committees—in particular in emerging market countries—have the executive branch chairing the committee, reflecting that such committees often have crisis management responsibilities. - Many committees are based on an executive decree or a memorandum of understanding (MOU) rather than being established in statute; as non-statutory bodies they often only have a coordinating function and members retain powers and decision making. ### IV. Framing and limitations noted - Effective institutional arrangements are necessary but not sufficient to prevent crises; crises can be brought on by profligate fiscal policy and lack of structural policies to stem erosion of competitiveness. - An effective macroprudential policy framework will not substitute for prudent policy in other areas; macroprudential policy needs strong microprudential policy foundations and an effective resolution framework to address “too important to fail” issues. - Much of the paper’s analysis is conceptual given the recent emergence of dedicated macroprudential frameworks; empirical assessment of model effectiveness is limited. - The paper supports IMF bilateral and multilateral surveillance (including FSAP advice) and technical assistance on establishing macroprudential frameworks. *Source: _wp11250 - References (IMF staff paper content provided in the source PDF).* ### Box 2. Institutional Arrangements for Macroprudential Policies in the Aftermath of ### Box 2. Institutional Arrangements for Macroprudential Policies in the Aftermath of the Crisis: Recent Trends ### Recent trends in institutional change - Two clear trends: - Movement towards more integrated institutional frameworks in some countries. - Popularity of financial stability committees, often chaired by a representative of the executive branch or the central bank. - Regional patterns: - Advanced economies, particularly in Europe, have seen integration of prudential supervision into the central bank. - Examples: “twin peaks” model in the Netherlands; conduct-of-business supervision separate in Belgium, France, and the United Kingdom. - Ireland: all supervision conducted by the central bank. - United Kingdom: created a financial policy committee (FPC) within the central bank, chaired by the governor and including government representation. - United States: government chairs the Financial Stability Oversight Council (FSOC), which functions separate from the Federal Reserve. - Emerging markets: changes typically feature a new committee with macroprudential responsibilities; no clear tendency on who chairs. - Chile and Mexico: financial stability committees chaired by the MOF. - Turkey: deputy prime minister heads the committee. - Asia: Malaysia established a financial stability committee within the central bank, chaired by the central bank governor in 2009; Thailand did so in 2008. - Legal constraints: - Existing legislation (central bank mandate, consumer protection responsibilities, constitutional protections) constrain extent of reform, especially in Latin America. - Example: Chile — the governor of the central bank is not legally a member of the financial stability committee because the committee was established by a junior law seen as undermining central bank independence enshrined in the Constitution. ### Mandates and usage of macroprudential policy - Prevalence of mandate: - "A macroprudential mandate is more common in emerging markets and is most often assigned to the central bank, although it is often only implicit." - "In one half of the emerging markets in the sample, there is a macroprudential policy mandate." - "This responsibility is assigned to central banks in 19 of the 21 countries." - In most cases, the mandate is not formal but rests on central bank roles (payment and settlement system stability, lender-of-last-resort) or on roles of other supervisory institutions. - Correlation between mandate and tool use: - "Fourteen countries that reported not having an institution(s) with a macroprudential mandate, nonetheless reported using instruments to address systemic risks during the last decade." - "10 countries that reported having an institution(s) with a macroprudential mandate did not use any such instruments." - The vast majority of countries reporting use of macroprudential tools are emerging markets. - Motivation for use in emerging markets: experience of previous systemic banking crises preceded by “boom and bust” cycles in lending and leverage. ### Constraints on fulfilling macroprudential mandates - Limits on information gathering: - Supervisors’ powers to access information are typically restricted to regulated institutions. - Powers usually include access to information on a bank’s exposures to large borrowers and transactions with related nonregulated companies in the bank’s financial group. - A few central banks have power to collect information directly from firms for monetary and/or credit policy tasks (example: Brazil, Korea). - Newly created committees (FSOC in the United States, FPC in the United Kingdom) tend to have fairly extensive information gathering powers or powers to obtain information from constituent agencies. - The G-20/FSB data gaps initiative is prompting many countries to review reforms needed. - Limits on prudential rule flexibility: - Microprudential supervisors may lack broad and flexible powers to implement policies that contain systemic risk buildup. - Most countries, especially advanced countries, have sufficient regulatory powers to enforce Basel capital requirements and conform to Basel Core Principles (BCP). - Where prudential rules are embedded in law (e.g., minimum capital adequacy requirement set at 8 percent as per Basel, or loan-to-value (LTV) ratios) or set by a minister, supervisors often cannot adjust requirements (such as sectoral risk weights or LTV ratios) in response to systemic risk buildup. - This is fairly common in Latin America and Europe; examples include Finland, France, and the Netherlands. - Regulatory perimeter expansion: - Expanding the perimeter of regulated institutions typically requires legislation and government involvement. - Most supervisory authorities can issue regulations on prudential and reporting requirements limited to already regulated entities; imposing regulation on nonregulated entities or transactions generally requires a prior change in the law. - Powers of financial stability committees: - Financial stability committees do not typically have power to “direct” individual regulatory authorities to address systemic risks. - Only very few countries have statutory financial stability committees with formal powers to recommend or direct macroprudential policies (examples: U.K. FPC, U.S. FSOC, Mexico’s FSC). - Most committees coordinate policy through information sharing and discussions; decision and implementation remain with individual agencies. ### Accountability and communication - Accountability mechanisms: - Most countries have accountability mechanisms for central banks and supervisory institutions, but formal accountability requirements specifically for macroprudential policies are rare. - Some countries are developing or have recently introduced such mechanisms (examples: Ireland, Mexico, the United Kingdom, the United States). - These often involve accountability to the public and Parliament. - United Kingdom: FPC required to publish a financial stability report (FSR) and a record of decisions and deliberations of FPC meetings. - United States: legislation requires publication of an annual report and testimony to Congress. - Communication practices: - Most countries communicate systemic risk assessments and policies mainly through issuing an FSR. - Among the 12 country case studies, 9 countries issue FSRs. - While FSRs contain assessments of risks (and often stress test results), risk warnings are publicized in only two cases (and only in one country are these warnings published on a regular basis). - Several countries report that they are developing their communication framework for macroprudential policies. ### Institutional models and key distinguishing dimensions - Five key distinguishing dimensions used to classify models: 1. Degree of institutional integration between central bank and financial regulatory and supervisory functions (full, partial, nonexistent). 2. Ownership of the macroprudential mandate (central bank, committee related to central bank, independent committee, multiple agencies). 3. Role of the treasury (active, passive, nonexistent). 4. Degree of organizational separation of decision making and control over instruments. 5. Whether a coordinating committee exists to help coordinate bodies (even if not charged with the mandate). - Resulting stylized typology: - The typology produces seven models plus a supranational model (the European Systemic Risk Board, ESRB). - Degrees of integration and ownership often condition observed models in practice; dimensions are not fully independent, reducing observed model variety relative to theoretical possibilities. - Table 1 (stylized models) — selected features (as presented): - Model 1 - Degree of integration: Full (at a central bank) - Ownership: Central bank - Role of MOF/treasury/government: No (Active*) - Separation of policy decisions and control over instruments: No - Model 2 - Degree of integration: Partial - Ownership: Committee “related” to central bank - Role of MOF/treasury/government: Passive - Separation of policy decisions and control over instruments: In some areas - Model 3 - Degree of integration: Partial - Ownership: Independent committee - Role of MOF/treasury/government: Active - Separation of policy decisions and control over instruments: Yes - Model 4 - Degree of integration: Partial - Ownership: Central bank - Role of MOF/treasury/government: No - Separation of policy decisions and control over instruments: In some areas - Model 5 - Degree of integration: No - Ownership: Multiple agencies - Role of MOF/treasury/government: Passive - Separation of policy decisions and control over instruments: No - Model 6 - Degree of integration: No (Partial*) - Ownership: Multiple agencies - Role of MOF/treasury/government: Active - Separation of policy decisions and control over instruments: No - Model 7 - Degree of integration: No - Ownership: Multiple agencies - Role of MOF/treasury/government: No (Active*) - Separation of policy decisions and control over instruments: No - Model R 1 (regional/supranational) - Degree of integration: No - Ownership: Committee (multinational; regional) - Role of MOF/treasury/government: Passive (European Commission; Economic and Financial Committee) - Separation of policy decisions and control over instruments: Yes *Italicized notes and asterisks are as presented in the source table.* *Source: Box 2, “Institutional Arrangements for Macroprudential Policies in the Aftermath of the Crisis: Recent Trends,” from the supplied IMF content unit.* ### 5. Existence of separate body coordinating across policies ### 5. Existence of separate body coordinating across policies ### Institutional separation and coordinating bodies - Institutional separation of policy decisions from control over policy instruments: arises when policy decision and policy implementation rest with different bodies or institutions. - Separation is common when the mandate is given to a committee, or when there is only partial integration of supervisory functions within the central bank. - No separation when there is full integration of all financial policy within the central bank or when multiple agencies each take their own decisions to address systemic risks in their respective policy domains. - Existence of a separate body coordinating across policies to address systemic risk: - A coordinating committee can promote a common understanding of risks and contribute to consistency of policy responses across agencies. - A separate coordinating committee is a feature of some models where the policy mandate is shared by multiple agencies. - By definition, it is not needed when the mandate and the associated decision making powers are assigned to a single body or a policymaking committee. - Key differences between a policymaking committee and a coordinating committee rest on whether the committee: - (i) is established in law; - (ii) has a right to make formal decisions or recommendations to affect the behavior of other policymakers; and - (iii) has a formally established accountability framework that is distinct from that of its member institutions. - Coordinating committee characteristics: - Typically based on an MOU; - Does not take formal decisions to influence its participants; - Does not have a separate accountability framework. ### Stylized models of macroprudential policymaking - Based on these dimensions we can identify seven stylized institutional models of macroprudential policymaking. - Most real-life institutional set ups correspond to one of these seven models, though some real-life models are hybrids or differ from the assigned model in some respects (marked in Table 1). - Table 1 also includes an eighth model describing the ESRB, which is the only existing example of a supranational institutional setup. - The seven models can be grouped into three broad classes: - First class: full integration between the central bank and all financial supervisory and regulatory functions. - Second class (models 2, 3, and 4): twin peaks, with the central bank retaining prudential functions, while conduct and securities regulation is separate. - Third class (models 5, 6, and 7): the central bank is separate from both prudential and securities market regulation. - Models within these groups share similarities, but there are important differences between models within each group. - Stylized models cannot capture “soft” features of real-life arrangements, such as the culture of cooperation and the quality of relationships between people. ### Assessment approach - Assessment proceeds in three steps: - Present a number of high-level requirements for an effective institutional model supporting macroprudential policy. - Assess strengths and weaknesses of the models identified in Section III against these criteria. - Discuss mechanisms to address weaknesses in Section V. - A desirable institutional model should be conducive to effective mitigation of systemic risk and provide for: - Effective identification, analysis and monitoring of systemic risk, including through - (a) assuring access to relevant information; and - (b) using existing resources and expertise. - Timely and effective use of macroprudential policy tools, by - (a) creating strong mandate and powers; - (b) enhancing ability and willingness to act; and - (c) assuring appropriate accountability. - Effective coordination across policies aiming to address systemic risk, so as to reduce gaps and overlaps in risk identification and mitigation, while preserving the autonomy of separate policy functions. ### Strengths and weaknesses: Model 1 (full integration) - Model 1 description: - Full integration within the central bank of essentially all financial regulatory and supervisory functions, including prudential regulation of financial institutions and the regulation of market activity in both retail and wholesale financial markets. - When the central bank is given the objective to safeguard financial stability, the central bank becomes the owner of macroprudential policy and its Board becomes the macroprudential decision maker. - Strengths — risk identification and monitoring: - Facilitates the flow of information and brings together relevant expertise that might otherwise be subject to legal constraints or strategic behavior among agencies.22 - Facilitates access to quantitative and qualitative microprudential data, including sectoral and interbank exposures needed to assess systemic risks. - Facilitates access to data available to a securities regulator (e.g., on positions taken in markets). - Analysis can bring together microprudential expertise and macro-financial linkage assessments, enriching analysis and exploiting complementarities between top-down and bottom-up approaches (e.g., in stress tests). - Strengths — use of existing expertise and functions: - Central banks have expertise from monetary policy and payment systems crucial for macroprudential policies. - Research functions can help identify and understand evolving systemic risk related to financial innovation. - Expertise in monitoring financial markets and analyzing aggregate and sectoral developments aids design of policies to reduce procyclicality risks. - Roles in oversight of payment systems and as lender of last resort generate further important expertise for design of macroprudential measures (IMF 2011a). - Strengths — communication and incentives: - Enables use of central bank experience in communicating risks to markets and the general public; risk warnings and messages likely to be coherent with officials speaking with “one voice.” - Mandate and responsibility clearly assigned to a single agency which can be held accountable. - Institution has clear incentives to act due to high costs of inertia for meeting other goals, e.g., price stability.23 - Central bank independence and a limited role of the treasury reduce the risk of delayed action due to the political cycle and short-term effects on government revenues (IMF 2011a). - Strengths — coordination across policy functions: - Coordination across macroprudential, monetary, and microprudential objectives takes place within one organization, facilitating internalization of trade-offs. - Reduces mismatches between the reach of mandates and the reach of powers because the decision maker controls most relevant tools, including those available to microprudential and securities regulators. - Policy decisions made by the Board can be implemented by a department of the same organization without compromising the operational autonomy of a separate organization. - Weaknesses — risk identification and organizational challenges: - Lacks institutional mechanisms to challenge internal views; risk that “house views” become entrenched if no culture encouraging contrarian views. - Full integration creates a large, multi-functional organization that is more difficult to manage; bringing data and expertise together across departments can be challenging. - Weaknesses — concentration of power and accountability: - Concentrates a lot of powers in the hands of unelected central bank officials.25 - Provides few safeguards against overly aggressive use of macroprudential (and other) policy tools. - Macroprudential policy is a field where delegation is desirable because it is subject to adverse political economy problems, requires high technical expertise, and faces strong lobbying and rent seeking. - Societal reluctance to concentrate both monetary policy and all financial regulatory policies in a single independent decision maker may require precise mandates and strong accountability mechanisms. - Weaknesses — reputational and mission conflicts: - Integration can reduce credibility for monetary policy if the public doubts the central bank’s focus on price stability (see Box 3). - Failures in microprudential supervision can affect the credibility of the monetary policymaker and may undermine independence of the monetary policy function. - Integration of conduct and markets regulation means the central bank inherits consumer and investor protection objectives and conduct of business functions which can distract attention from systemic risk objectives, especially in long periods of calm. *Source: _wp11250 - 5. Existence of separate body coordinating across policies_* ### Box 3. Monetary and Macroprudential Policies: One Authority or Two? ### Box 3. Monetary and Macroprudential Policies: One Authority or Two? ### Game-theoretic trade-offs and coordination vs. credibility - Key trade-off: policy coordination (internalizing externalities across instruments) versus institutional credibility (independence to preserve policy effectiveness). - Instruments are cross‑effective: - Interest rates affect financial-market behavior. - Macroprudential policy affects aggregate demand via cost of credit. - Externality example (Nash outcomes vs. coordinated solution): - Separate agencies may choose a suboptimal policy mix because each responds to anticipated actions of the other. - Fiscal–monetary analogy: treasury pushes for greater output (larger deficit) anticipating central bank reaction; central bank keeps rates higher anticipating larger deficits → equilibrium with deficit and policy rate both higher than optimal (more crowding out). - Central bank vs. macroprudential regulator scenario: in recession central bank cuts rates, financial authority tightens macroprudential policy → central bank cuts further anticipating contractionary effect → outcome: too low interest rates and too tight macroprudential measures relative to coordinated solution. ### Credibility and institutional design implications - Credibility is critical for policy effectiveness, particularly monetary policy. - Central bank independence from treasury is important to preserve price stability (reference to Barro and Gordon, 1983 logic). - Joint authority over monetary and macroprudential objectives can undermine credibility: - If inflation rises while risk‑taking is low, a joint authority may find it harder to credibly fight inflation when that conflicts with goals to encourage risk‑taking → worsened sacrifice ratio. - Consequently, a Nash game between two separate, independent regulators can sometimes dominate a coordinated (single authority) solution. - Optimal institutional structure depends on relative weight of coordination vs. credibility concerns and on information sharing and talent/resource constraints (especially in small countries). ### Treasury involvement and government coordination - Excluding the treasury may entail costs when systemic risk mitigation requires coordinated government action (legislation, expanding regulatory perimeter, fiscal complements). - Willingness to cooperate may diminish if treasuries are fully excluded from systemic risk discussions. - Treasury participation can be beneficial when cooperation is needed to ensure mitigation of systemic risk. ### Models 2–4 (twin‑peaks underlying model): strengths and weaknesses overview - Twin peaks: close institutional integration between central bank and prudential supervisor for potentially systemic institutions; conduct and securities regulation separate. - Examples: - United Kingdom: prudential agency organized as subsidiary of Bank of England; new Financial Conduct Authority (FCA) outside central bank. - United States: Federal Reserve supervises systemically important holding companies with enhanced prudential standards; FSOC designates such firms; activity regulation remains with specialized agencies including new Consumer Board and SEC. - Belgium: moves toward twin peaks model similar to the Netherlands. - Common feature: strong central bank role in systemic risk mitigation; variation in coordination, accountability, and separation of tools. ### Model 2 — central bank macroprudential committee (examples: UK FPC) - Structure: - Dedicated committee at central bank responsible for system‑wide risk mitigation. - Sits alongside Monetary Policy Committee (MPC); chaired by governor in the UK example; assembles central bank officials and heads of prudential authority (inside central bank) and FCA (outside). - Strengths: - Strong access to prudential data and expertise; helps risk identification. - Single body assigned responsibility for risk mitigation → clearer accountability within central bank. - Beneficial incentive effects from assigning mandate to central bank likely transfer to committee behavior. - Creating a committee distinct from monetary policy decision‑makers can help limit reputational risk spillovers between macroprudential and monetary failures. - Committee format allows treasury participation (observer or voting member) without undermining monetary independence. - Weaknesses: - Concentration of power requires compensating mechanisms: unambiguous mandate and strong accountability. - Potential reduced coordination with monetary policy relative to full integration (model 1) → possible suboptimal policy mix (see Box 3 game). - Separation of conduct/securities authority outside central bank: - Positive: central bank management less distracted by day‑to‑day conduct regulation. - Negative: possibly inadequate engagement/support of conduct/securities regulators in systemic risk identification; representation on macroprudential committee and legal duties to provide information can mitigate. - Negative: committee lacks immediate control over tools held by conduct/securities regulators; bridging mechanisms required. ### Model 3 — independent macroprudential committee chaired by treasury - Structure: - Central bank participates but committee is independent from central bank and chaired by treasury. - Overall responsibility for financial stability shifts away from central bank toward committee; treasury plays stronger decision role. - Implications (strengths and weaknesses): - Information fragmentation: no single institution may possess all information needed for interlinked systemic risk analysis, creating inefficiencies in risk assessment.30 - Decision delays: greater balance can lead to persistent differences of view and delayed action. - Accountability challenges: multiple key players (central bank, committee, treasury) make it harder for public to identify who is ultimately responsible for crisis prevention; communication becomes more challenging. - Separation between decision and control over tools increases, requiring stronger compensating mechanisms. - Strong treasury role: - Advantage: can garner political support for committee actions. - Risk: short‑term political considerations could prevail over countercyclical actions that reduce industry profits and tax revenues; may cause delay in tightening in good times. - Risk to operational autonomy: treasury dominance may weaken micro‑supervisory authority and central bank operational independence in monetary policy, especially where safeguards are weak. ### Model 4 — like model 1 but with separate conduct/securities authority and no formal bridge - Structure: - Authority overseeing wholesale and retail market activity is separate from central bank. - No formal “bridge” (representation on macroprudential committee) connecting central bank and activities regulator. - Implications: - Bridge less important in less developed/sophisticated markets, but even then access to retail market information (e.g., mortgage terms) and shadow‑bank activities may be needed. - Mandates of separate regulators can emphasize financial stability alongside consumer protection (as in the Netherlands), but cooperation may still require additional mechanisms. ### Models 5–7 — strong institutional separation: strengths and weaknesses - Characteristics: - Greater institutional separation between central bank and supervisory agencies; prudential supervision/regulation is separate and operationally autonomous. - Central bank typically retains payments oversight and control over reserve requirements but lacks direct control over macroprudential tools like LTV ratios and variable capital/liquidity requirements. - Identification and mitigation of systemic risk are multi‑agency (central bank often leads risk identification in practice); use of macroprudential tools is distributed among agencies (“distributed decision making”). - Strengths: - Keeps agencies focused on core objectives: central bank on price stability; banking supervisor on safety and soundness of individual institutions. - Reduces overlaps, fosters distinct institutional cultures, and facilitates separate accountability. - Low risk of single‑institution dominance unchallenged in risk identification and assessment. - Weaknesses and risks: - Impeded flow of microprudential data and risk assessments to central bank due to rivalry, turf issues, or legal obstacles. - Harder to combine macroeconomic/market expertise of central bank with institution‑specific knowledge of prudential regulator; collaboration requires scarce resources to be allocated to joint goals. - Risk of “gaps”: individually supervised firms or groups can grow systemically important without tightened supervision (example: prior U.S. model where brokers and money market funds remained light‑touch even as their systemic importance grew).34 - Coordination in communication: multiple agencies may issue conflicting messages. - Diluted accountability and incentives: a “commons” problem where collective responsibility reduces incentives for each agency to invest in systemic risk reduction (Nier, 2009). - Delays in action: agencies may disagree on risk assessments, leading to delayed responses (U.K. example where prudential liquidity regime tightened only after crisis).35 - Suboptimal policy mix: central bank without prudential tools may overuse reserve requirements or overinvest in published Financial Stability Reports (FSRs) instead of deploying mix of prudential tools; evidence suggests central banks without prudential functions are more likely to issue FSRs.36 *This box was prepared by Giovanni Dell’Ariccia.* ### Box 4. Central Banks and Prudential Policy: Integration Versus Separation ### Box 4. Central Banks and Prudential Policy: Integration Versus Separation ### Empirical challenges and prior evidence - Strong empirical evidence on the effect of the institutional structure is hard to come by for three main reasons: - First, the institutional structure is only one of many factors that are likely to affect the frequency and severity of crisis outcomes across countries. - Second, crisis outcomes themselves are rare tail events and the number of observations available for analysis is therefore typically small. - Third, institutional structures vary in a number of subtle ways that are not all easily captured by empirical analysis. - Goodhart and Schoenmaker (1995) analyze a sample of 104 (large) bank failures across 24 countries in the 1980s and early 1990s: - Of the 24 countries, 11 countries had an integrated regime and 13, a separated regime during the 1980s. - They apply statistical tests to determine whether significant differences between observed and expected failure rates under each regime and find that countries with integrated regimes experience significantly fewer failures. ### Cross-country evidence from the recent crisis (measures and patterns) - Three measures of the depth of crises, each scaled by GDP and sourced from Laeven and Valencia: - (i) bank failures, measured as the fraction banking system assets of failed banks; - (ii) the amount of capital support made available by the authorities; - (iii) the dollar amount of financial guarantees provided by the authorities to the banking system. - Observed patterns: - It is not the case that each and every country with integrated arrangement had a milder crisis experience than each and every country with separated arrangements. - Advanced Europe example: the Netherlands (integrated) appears to have had a worse crisis than some countries with separated arrangements. - World sample example: Australia (integrated) appears to have had a milder experience than many countries with integrated arrangements. - Inspection of charts suggests that across all three measures (failed banking assets, capital injections, and guarantees) the group of countries with close integration between central bank and banking supervisory agencies show a lower mean than those countries with separated arrangements. - Evidence is somewhat stronger for advanced Europe than for the larger world sample. ### Regression evidence and role of current account position - Regressions introduce the current account position in the years leading up to the crisis (2004-2006) as an important macroeconomic driver. - Findings: - When the current account position is accounted for, a statistically significant difference emerges between groups across all three measures employed. - Interaction analysis (Dummy*Current Account) shows that while current account deficits led to a worsening of crisis outcomes on average, this relationship becomes much weaker for those countries with stronger integration between central banks and banking supervisory agencies. - These interaction results hold across all three measures of crisis depth. - Regression table (Advanced Europe): coefficients, standard errors in parentheses, observations, and R-squared - VARIABLES: Failed | Injection | guarantees | Failed | Injection | guarantees - Dummy: Supervisor within CB (1=within) - -0.269** (0.0318) - -2.769** (0.0128) - -58.34* (0.0788) - -0.206* (0.0518) - -2.812*** (0.00246) - -59.40* (0.0513) - Current Account Surplus - -1.807** (0.0187) - -9.722 (0.137) - -313.5 (0.137) - -2.645*** (0.00136) - -21.08*** (0.00481) - -589.9** (0.0251) - Dummy*Current Account - 3.440** (0.0208) - 28.68** (0.0115) - 697.8* (0.0785) - Constant - 0.255*** (0.00209) - 4.124*** (2.76e-05) - 62.72*** (0.00801) - 0.275*** (0.00033) - 4.722*** (2.30e-06) - 77.27*** (0.00214) - Observations: 16 | 14 | 14 | 16 | 14 | 14 - R-squared: 0.429 | 0.444 | 0.275 | 0.641 | 0.715 | 0.476 - pval in parentheses - Significance: *** p<0.01, ** p<0.05, * p<0.1 ### Consistency with Merrouche and Nier (2010) - Merrouche and Nier (2010) examine pre-crisis period (1999–2007) for OECD countries in a panel-data setup: - They find the buildup of financial imbalances (measured by the ratio of loans to deposits) was stronger where current account deficits were wide. - They find that where the central bank had full control of supervision and regulation, the buildup of imbalances was less severe, controlling for a range of other country characteristics. - Interaction exercises show that the impact of capital flows on the buildup of financial imbalances was weaker for countries where the central bank had full control of supervision and regulation. - Their results point to additional factors affecting the buildup of financial imbalances, in particular the strength of supervisory and resolution powers. ### Mechanisms to address weaknesses of institutional models (selected highlights) - Establishment of a coordinating committee (present in models 5 and 6, absent in model 7) can: - Facilitate exchange of information and foster engagement with the shared goal of financial stability. - Clarify differences in perspectives and create a consensus on appropriate policy action. - Spot weaknesses in the supervisory regime for specific institutions and identify supervisory gaps. - Coordinate communication strategies across agencies. - Limitation: may not fully address deep-rooted accountability and incentive problems. - Mechanisms to discipline independent use of strong powers: - Mandate established in law that opens up and constrains discretionary use of powers. - Accountability framework focused on processes, including: - (i) an ex ante communication of the policymakers’ overall strategy; - (ii) a detailed communication of the deliberations that led to particular policy decisions; - (iii) an ex post assessment of the effectiveness of action taken. - Examples: - Ireland: central bank required by law to publish an annual plan of regulatory initiatives, including their aims and objectives. - United Kingdom: a published record of meetings of the FPC must specify any decisions taken and set out a summary of the committee’s deliberations; the FPC is required to publish an FSR twice a year containing (i) an assessment of risks to financial stability; (ii) a summary of the activities of the FPC over the reporting period; and (iii) an assessment of the effectiveness of actions taken by the FPC over the reporting and previous periods. - Internal checks and balances: include supervisory agencies not part of the central bank and independent experts; dedicated advisory committees where confidentiality is a concern. - Mechanisms to compensate for separation of decisions from control over instruments: - Vest the macroprudential authority with binding powers over specific and well-defined macroprudential instruments carved out from a separate regulatory authority (e.g., dynamic capital buffer: decisions rest with the FPC; implementation/enforcement with prudential regulator). - Use of nonbinding “recommendations” subject to formal “comply or explain” mechanisms (e.g., European Union, United Kingdom, United States) and publication of recommendations. - Membership of implementing agencies on decision-making bodies to increase ownership and compliance; requirement for separate agencies to consult the committee when regulatory changes may affect financial stability. - Recommendations can be addressed to legislative bodies to effect law changes (e.g., ESRB to European Commission or European Parliament; UK FPC recommendations to the treasury). - Macroprudential framework should enable coordination beyond financial regulatory tools to fiscal, exchange rate, housing market and competition policy. - Mechanisms to address the risk of delayed action: - Design voting arrangements using simple majority or qualified majority rather than unanimity to reduce blocking risks. - Ensure a strong voice of the central bank on policymaking/coordinating committees (example: Mexico — central bank has three voting seats on a ten-strong committee chaired by the treasury). - Clearly distinguish macroprudential policy setup from crisis management to reduce treasury involvement in macroprudential decisions. - Accountability design: e.g., in the United States both the FSOC and each of its members must testify before Congress that all agencies have taken sufficient action to address systemic risk. - Mechanisms to address lack of cooperation in risk assessment and mitigation: - Establish a formal coordinating committee to mitigate lack of cooperation and to address overlaps and gaps. - Make each agency’s objectives include the mitigation of systemic risk to increase engagement and resource allocation. - Formal legal arrangements to enable public warnings and recommendations to constituent agencies (example: Mexico). - Remove legal impediments to information sharing (e.g., confidentiality constraints); establish duty to proactively make available information needed to assess systemic risk. - Give committee powers to request information from separate agencies or collect information directly from firms (examples: United Kingdom, United States new authorities). - Ensure data collected are available to all agencies, for example through a joint database (example: Australia). ### Conclusion (key messages) - Evidence is suggestive only given cross-sectional analysis limitations, but findings are broadly consistent across multiple measures and with independent studies. - Integrated supervisory arrangements appear associated with milder crisis outcomes on average and seem to attenuate vulnerabilities associated with strong capital inflows. - “One size does not fit all”: arrangements need to take account of local conditions, legal frameworks, political economy considerations, and potential transitional costs. - Effective macroprudential frameworks and mechanisms (coordinating committees, accountability, legal powers for information sharing, voting rules, and targeted instrument authority) can mitigate weaknesses of different institutional models. *Source: Box 4. Central Banks and Prudential Policy: Integration Versus Separation (from the provided IMF content unit).* ### Box 5. Macroprudential Policy Frameworks: Does One Size Fit All? ### Box 5. Macroprudential Policy Frameworks: Does One Size Fit All? ### Objective and scope - Explores whether a single institutional model for macroprudential policy can work across countries or whether “one size does not fit all.” - Examines local considerations likely to affect choice of institutional model. ### Factors affecting choice of model - Availability of resources - Greater availability of resources, technical know-how, and ability to pay highly trained staff benefits effectiveness of macroprudential policy. - In countries where qualified staff are difficult to find (many emerging markets economies or low-income countries), concentrating available resources institutionally may be beneficial. - In a number of advanced countries this is a second-order consideration, although fiscal constraints from the crisis may argue for solutions that reduce duplication. - Monetary policy regime - Where central bank monetary actions are heavily constrained (e.g., part of a currency union or operating a currency board), reputational cross-over from assigning the central bank a macroprudential function may be reduced. - In such cases benefits of integrating central bank and prudential functions (coordination between monetary and macroprudential functions) are less pronounced (Nier 2009). - Concern that a strong role of the treasury in macroprudential policy might undermine monetary policy autonomy may be somewhat weaker. - Size and complexity of the financial system - Size, complexity, and level of competition may affect choice of model (Goodhart and Schoenmaker 1995). - However, open economies with relatively simple systems can expand rapidly and become more complex, producing systemic risk. - Example: Iceland—ratio of banking system assets to GDP rose from 200 percent to just under 1000 percent in the space of just a few years (2003 to 2008), with expansion sourced mainly in wholesale funding markets. - Product innovations (wholesale: credit default swaps; retail: foreign currency denominated mortgages) can change interconnections and macro-financial feedback. - Because size and complexity can change rapidly, they may not be a material driver of institutional model choice. - History of existing institutional structures - Historical roles of central banks (e.g., as providers of last resort) shaped supervisory/regulatory responsibilities (Goodhart and Schoenmaker 1995). - U.S. example: National Banking Acts of 1863 and 1864 established federally chartered banks and the Office of the Comptroller of the Currency (Department of the Treasury) before the Federal Reserve was created in 1913. - Latin America example: Edwin Kemmerer missions led to creation of central banks and separate regulatory agencies in several countries (Chile, Colombia, Ecuador, and Peru). - Underlying institutional model can affect which institution is assigned the macroprudential mandate. - Legal traditions - Constitutional protection of agency autonomy may be an obstacle to models allowing binding instructions from one agency to another. - Shaped arrangements in Mexico (new committee cannot issue binding directions to constituent agencies) and Chile (central bank has observer status only on the macroprudential committee to protect independence). - Political economy - Financial sector regulation features political economy problems, requires technical expertise, and faces strong lobbying. - Societies differ in willingness to delegate to technocrats (including central banks); some prefer greater political debate and checks and balances. ### Overall assessment of drivers - Strong effect on model choice: available resources, history of existing arrangements, legal traditions, political economy. - Relatively mild effect on model choice: size and complexity of the financial system, existing monetary policy framework. ### General conclusions on institutional models - Country-specific constraints must be met; not all institutional models are equally conducive to effective macroprudential policy. - Stylized models each have strengths and weaknesses; differences exist in their tally of pros and cons (see Appendix III in source). - Weaknesses can sometimes be addressed by safeguards or mechanisms, but these may not fully restore effectiveness. - Informal arrangements can work well but are less resilient to non-cooperative behavior; formal institutions/mechanisms limit risks from changes in key people, incentives, or personal relationships. - Objective: indicate conditions that should be met for any given model to work well and distill general and specific lessons as guidance. ### General lessons (high-level recommendations) - The central bank should play an important role in macroprudential policy to harness institutional incentives, expertise, and ensure coordination with monetary policy, provision of liquidity, and payment systems oversight. - Complex and fragmented regulatory and supervisory structures are unlikely to effectively mitigate system-wide risks. - Fragmentation reduces effectiveness of risk identification, increases likelihood of risky system development, and introduces frictions from collective decision making. - Institutional bridges spanning microprudential, conduct, and securities market supervision (when outside the central bank) can aid risk identification and mitigation. - Participation of the treasury is useful, but a dominant role poses risks. - Treasury participation ensures a bridge to the legislature and brings fiscal policy issues. - A dominant treasury role risks delayed macroprudential action in good times due to political economy pressures and can compromise institutional independence of monetary and supervisory policy. - Systemic risk prevention and crisis management are distinct functions and should be supported by separate arrangements. - Treasury more naturally assumes a strong role in crisis management; independent agencies can balance this role. - It may be desirable to establish macroprudential policy arrangements separate from the crisis management framework. ### Effective identification, analysis, and monitoring of systemic risk (specific recommendations) - Mechanism for effective sharing of information should be in place. - Ensure availability of all data and information needed to assess systemic risks by removing legal obstacles to data sharing, setting up mechanisms for data collection, and centralizing information. - All parties with access to relevant data should act pro-actively to provide information needed to assess systemic risk. - At least one institution involved in systemic risk analysis should have access to all available data and information. - Partial analysis by multiple agencies cannot assure the same depth of assessment given complex evolving interactions. - Leverage existing expertise. - Central banks will often be well placed to take the lead in risk assessment given the complexity of assessing systemic risk. - Involve all agencies with relevant knowledge and information and establish mechanisms to challenge dominant institutional views. ### Institutional design to ensure timely and effective use of tools (specific recommendations) - Institutional mechanisms should promote willingness to act and reduce risk of delayed policy action. - Legal framework should establish a formal mandate and accountability for timely and effective macroprudential policy action. - Assign the macroprudential mandate to a single institution, body, or decision-making committee that can be held accountable. - Establishing financial stability in the mandate of several institutions is useful for collaboration, but distributing the macroprudential mandate across several bodies can lead to collective action problems, reduced accountability, and weakened incentives. - Assign the mandate to institutions whose other objectives are closely aligned with macroprudential objectives and where cost of inaction is high. - This argues for a strong role of the central bank alongside other regulatory agencies; treasury involvement should be more limited. - Complement mandates with appropriate powers. - Powers to obtain information, take or initiate regulatory action, and initiate changes in the regulatory perimeter are necessary. - Guard against overly restrictive macroprudential policy through mandates and accountability mechanisms. - To constrain discretionary use of powers, mandates may specify secondary objectives and be flanked by strong accountability. - Accountability can require transparency: publication of a policy strategy, communication of decisions, and ex post assessments of effectiveness. - Design accountability mechanisms so as not to unduly compromise effectiveness. - Mechanisms should not give undue room for special interests to lobby for overly accommodative macroprudential policy. ### Coordination across policy areas (design principles) - Institutional integration of financial regulatory functions within the central bank can support coordination with monetary and microprudential policy, but requires safeguards. - Macroprudential frameworks should not become a vehicle to compromise monetary policy independence. - Separate accountability mechanisms for monetary and macroprudential policy are likely useful in many cases. - Avoid institutional separation of policy decisions and control over policy tools where possible. - Where separation exists, mechanisms are needed to ensure powers to “direct” actions of constituent or other agencies while preserving institutional autonomy. - Options include nonbinding recommendations with a “comply or explain” mechanism or carving out specific macroprudential instruments and assigning their use to the macroprudential decision maker. - Where decision-making powers are distributed among several agencies, establish a coordinating committee. - A coordinating committee helps form a shared appreciation of risks, reach consensus on policy mix, and identify overlaps and gaps. - However, a coordinating committee may not be sufficient to overcome lack of overall accountability in presence of a “commons” problem. ### Open questions and areas for further study - Country-specific conditions affecting choice of institutional model. - Trade-offs between precision and flexibility of mandates and powers. - Trade-offs between policy autonomy and policy accountability. - Mechanisms to ensure proper flow of information and address incentive problems when agencies are institutionally separated. *Source: Box 5. Macroprudential Policy Frameworks: Does One Size Fit All? (content unit from _wp11250).* ### Appendix I. Supervision of Banking, Securities, Insurance, and Payments in Surveyed ### _wp11250 - Appendix I. Supervision of Banking, Securities, Insurance, and Payments in Surveyed Countries ### Supervision frameworks (Appendix I) - Country supervisory assignments (Banking / Securities / Insurance / Payments / Oversight legend as presented): - Argentina: CB / S / I / CB - Australia: B S B CB CB Central Bank - Austria: CB / B / B / B / CB / B / Banking Supervisor - Belgium (new): CB S CB CB S Securities Supervisor - Brazil: CB / S / I / CB / I Insurance Supervisor - Bulgaria: CB SI SI CB SI Securities and Insurance Supervisor - Canada: B / S / B / CB / G Government - Chile: B / SI / SI / CB - China: B / S / I / CB - Colombia: B / S / B / CB - Czech Rep.: CB CB CB CB - Finland: B / B / B / CB - France (new): CB S CB CB - Germany: CB / B / B / B / CB - Greece: CB / S / G / CB - Hong Kong SAR: CB S I CB - Hungary: B / B / B / CB - India: CB / S / I / CB - Indonesia: CB / S / CB - Ireland (new): CB CB CB CB - Italy: CB / S / I / CB - Japan: B / B / B / CB - Jordan: CB S I CB - Lebanon: B / B / G / CB - Malaysia: CB / S / CB / CB - Mexico: B / B / I / CB - Mongolia: CB / SI / CB - Netherlands: CB / S / CB / CB - New Zealand: CB S CB CB - Nigeria: CB / S / I / CB - Norway: B / B / B / CB - Paraguay: CB / S / CB / CB - Peru: B / S / B / CB - Philippines: CB / S / I / CB - Poland: B B B CB - Portugal: CB / S / I / CB - Romania: CB / S / I / CB - Russia: CB / S / I / CB - Serbia: CB / S / CB / CB - Singapore: CB / CB / CB / CB - Slovak Rep.: CB CB CB CB - South Africa: CB SI SI CB - Spain: CB / S / I / CB - Sweden: B / B / B / CB - Switzerland: B / B / B / CB - Thailand: CB / S / I / CB - Turkey: B / S / I / CB - UK (old): B B B CB - Uruguay: CB / CB / CB / CB - US: CB / B / S / I / CB - Legend / labels used in table: CB, B, S, I, SI, G, text labels such as "Central Bank", "Banking Supervisor", "Securities Supervisor", "Insurance Supervisor", "Government". *Source for table: content as presented in Appendix I.* ### Use of supervisory labels and institutional variety - Multiple models coexist: central bank-led supervision (CB), single sector supervisors (B, S, I), combined securities & insurance supervisors (SI), government (G), and mixed labels with explanatory text. - Several countries listed as "(new)" for recent institutional changes (Belgium (new), France (new), Ireland (new)). --- ### Appendix II. Use of Selected Macroprudential Instruments in Surveyed Countries ### Instruments surveyed - Caps on loan-to-value ratios - Caps on debt-to-income ratios - Countercyclical/dynamic provisioning - Ceiling on credit growth - Countercyclical/time-varying capital requirements - With/Without mandate classification ### Key country entries (preserve X marks and categories) - Without Mandate (examples with X marks as in source): - Canada: X - Chile: X - Colombia: X / X / X / X (multiple Xs across columns) - India: X / X (two X marks under different instrument columns) and note "X X X" formatting preserved where present - Mexico: X - Norway: X / X - Peru: X - Poland: X - Russian Federation: X - Serbia: X / X - Singapore: X / X - Sweden: X - Turkey: X - United Kingdom (old): (no X marks listed) - With Mandate (examples with X marks as in source): - Argentina: (listed under With Mandate category) - Brazil: X - Bulgaria: X / X (where shown) - China: X - Hong Kong SAR: X X - Hungary: X / X - Lebanon: X - New Zealand: (listed) - Nigeria: X - Romania: X / X - South Africa: (listed) - Spain: X - Thailand: X / X - United States: (listed under With Mandate) - Uruguay: X - Source annotation: "Source: 2010 MCM survey." *Notes: The original table uses many X marks across columns and distinguishes countries "Without Mandate" and "With Mandate." Exact positioning and multiplicity of X marks preserved from source layout.* --- ### Appendix III. Summary of Strengths and Weaknesses of Stylized Models ### Assessment criteria and relative rankings (symbols preserved) - Seven models (Model 1 through Model 7) evaluated across criteria grouped under: 1. Provide for effective identification, analysis and monitoring of systemic risk, including through: - a. facilitating the flow of information needed for risk assessment: Model rankings: , , , , , ,  - b. facilitating full use the existing analytical expertise needed for risk assessment: , , , , , ,  - c. promoting comprehensive assessment of risk by matching information and expertise: , , , , , ,  - d. challenging dominant views of one institution: , , , , , ,  - e. facilitating the use of the best existing expertise in communicating risk: , , , , , ,  - f. favoring clear communication of risks: , , , , , ,  2. Provide for timely and effective use of macroprudential policy tools, by: - g. clearly allocating mandate and accountability: , , , , , ,  - h. assigning responsibility to an institution, that has clear incentives to act due to high costs of inertia for meeting its other goals: , , , , , ,  - i. limiting risk of delayed action due to the political cycle: , , , , , ,  - j. limiting risk of delayed action due to separation of decisions and control over tools: , , , , , ,  - k. avoiding risk of delayed action due to problem falling between the cracks (existence of regulatory gaps, different objectives and accountabilities): , , , , , ,  - l. fostering ability to acquire new policy powers (tools, perimeter) when systemic risk migrate: , , , , , ,  - m. preventing lower policy effectiveness due to creation of a large and multi-functional organization: , , , , , ,  3. Provide for effective coordination across policies to address systemic risk, while preserving their autonomy: - n. coordination between macroprudential policy and monetary policy: , , , , , ,  - o. coordination between macroprudential policy and microprudential policy: , , , , , ,  - p. coordination between macroprudential policy and fiscal policy: , , , , , ,  - q. of separate policies: , , , , , ,  4. Other aspects: - r. concentration of power: , , , , , ,  - s. cross-over of reputational risks across central bank monetary and prudential functions: , , , , , ,  - Note included in source: "Relative ranking should be read horizontally. Note: Country-specific circumstances and existence of compensating mechanisms mean that the strengths and weaknesses of real-life models can differ from those indicated in this table." --- ### Appendix IV. Examples of Mechanisms to Address Weaknesses of the Models ### Mechanisms mapped to identified weaknesses - Provide for effective identification, analysis and monitoring of systemic risk: - Insufficient access to information and data: - Engage all authorities that have information and data on institutions, markets and products. - Remove legal obstacles to the sharing of information. - Establish a legal requirement to pro-actively share relevant information (e.g., Canada). - Create right to obtain data directly from firms (as a back stop). - Centralization of financial databases in existing institution (Australia) or by creating new dedicated institution (like OFR in the United States). - Legal power to extend the scope of data collection by macroprudential authority (United States). - Give the policymaker a legal right to be informed on all planned decisions of other authorities which will affect the financial system or be source of systemic risk. - Sub-optimal use of relative strengths of existing organization in risk assessment: - Formally assign the function of comprehensive systemic risk assessment to the institution with the best know-how; other institutions should contribute by assessing risks in their domains. - Lack of mechanisms to challenge views when decision-making power is concentrated: - Involvement of all authorities with access to relevant information and data at some part of decision making process. - Add external members to the decision making bodies (the United Kingdom). - Establish a formal structure to provide external views (e.g., Advisory Scientific Committee of the EU ESRB). - Develop informal venues of exchanging views at technical levels. - Lack of clarity of communication of risks when multiple agencies involved: - Formally assign the function of risk communication to the institution with the best know-how. - Duplication of scarce resources: - Formally assign comprehensive systemic risk assessment to one institution with largest relevant know-how; other institutions contribute domain assessments. - Provide for timely and effective use of macroprudential policy tools: - Risk of delayed actions due to shared responsibility: - Establish and emphasize financial stability in mandates of institutions. - Establish a coordinating or policymaking committee. - Provide for strong accountability frameworks (e.g., individual accountability of committee members). - Cross-membership of authorities governing bodies. - Risk of delayed actions due to multiple players and overlaps: - Keep institutional structure simple. - Presence of an ex-ante mechanism to make decisions where competences overlap. - Avoid unanimity requirements and establish simple or qualified majority voting. - Individual accountability of committee members (United States). - Delayed actions due to separation of decisions and control over tools: - Establish powers to issue formal recommendations with comply or explain mechanism or the power to direct the use of specific tools. - Obligation (United States) or possibility (EU ESRB) of making recommendations and answers public. - Cross-membership of authorities governing bodies. - Individual accountability of committee members (United States). - Delayed actions due to problems falling between the cracks: - Clearly identify lead macroprudential authority and assign proper mandate and powers. - Add financial stability objective to mandate of all institutions involved. - Cross-membership of authorities governing bodies. - Establish a committee to decide who should cover a regulatory gap or whether closing the gap needs legal change. - Establish ex-ante mechanisms to bring about legislative change as necessary. - Individual accountability of committee members (United States). - Delayed actions due to behavior of the Treasury: - Establish a crisis management committee alongside macroprudential committee, with the treasury chairing the former. - Simple or qualified majority voting. - Establish a strong voice for the central bank on a policymaking committee (Mexico). - Individual accountability of committee members (United States). - Delayed actions due to lack of new powers (tools, perimeter): - Involve the Treasury in policymaking process to give it understanding of need for new powers. - Establish a legal right for the committee to designate institutions and infrastructure to enhanced oversight (United States). - Establish legal mechanisms (e.g., nonbinding recommendations) to government/parliament. - Need to guard against over-restrictive policy: - Add secondary objectives to the mandate to force consideration of costs to medium and long term growth (United Kingdom, Ireland). - Strong mechanisms of policy accountability and transparency (e.g., publication of a policy strategy, publication of the record of meetings, regular reports to parliament). - Allow for external experts to influence policy decisions. - Provide for effective coordination across policies without undermining autonomy: - Weak coordination between macroprudential and monetary policy: - Cross-membership of macroprudential and MPCs. - Informal exchanges of views. - Regular interactions between analysts working on monetary and macroprudential policy. - Macroprudential policy may undermine independence of monetary policy: - Separate accountability frameworks for macroprudential and monetary policy. - Avoid leading role of the government on a macroprudential committee. - Weak coordination between macroprudential and microprudential policy: - Involve all supervisory agencies in risk identification and formulation of policy response. - Involve supervisory staff in systemic risk identification and analysis. - Establish coordinating or policymaking committee. - Establish power to issue recommendations with comply or explain mechanism or binding directions for well-specified macroprudential tools. - Emphasize financial stability in the mandate of the microprudential supervisor. - Cross-membership of boards of institutions involved in macroprudential policy. - Weak coordination between macroprudential policy and fiscal policy: - Involve the treasury in the policymaking process or provide it regularly with up to date systemic risk assessment. - Give macroprudential policymakers the right to make (non-binding) recommendations on specific fiscal issues and policies. --- ### Appendices V and VI. Experience in the Recent Crisis (Advanced Europe and World) ### Data sources and notes - Sources: Laeven and Valencia (2010), and Claessens, Dell’Ariccia, Igan and Laeven (2010). - Footnotes in source: - 1/ Failed banks, fraction of total banking assets (%). - 2/ Announced or pledged amounts, and not actual uptake. - 3/ Announced or pledged amounts, and not actual uptake. Excludes deposit insurance provided by deposit insurance agencies. ### Crisis experience indicators (as presented) - Advanced Europe (charts and country listings preserved in source): - Failed Banks (fraction of total banking assets, countries listed include Iceland, Belgium, United Kingdom, Luxembourg, Ireland, Germany, Denmark, Sweden, Austria, Switzerland, Netherlands, France, Portugal, Spain, Greece, Italy). - Capital Injection (announced or pledged amounts; country ordering includes Ireland, Austria, Belgium, United Kingdom, Germany, Sweden, Norway, Switzerland, Netherlands, Portugal, Greece, France, Italy, Spain). - Guarantees (announced or pledged amounts; country ordering includes Ireland, United Kingdom, Sweden, Austria, Belgium, Germany, Norway, Switzerland, Netherlands, Spain, France, Portugal, Greece, Italy). - Distinctions made between "outside Central Bank" and "within Central Bank" and "outside Average" and "within Average" and "Bank supervisor:" markers in charts. - World (charts and country listings preserved in source): - Failed Banks (fraction of total banking assets, countries listed include Iceland, Belgium, Kazakhstan, United Kingdom, Luxembourg, Latvia, Ireland, Germany, China, Denmark, Sweden, Austria, Japan, Switzerland, Ukraine, Korea, Rep. of, Netherlands, France, United States, Portugal, Spain, Greece, Italy, Kuwait). - Capital Injection (announced or pledged amounts; country ordering includes Ireland, Austria, Belgium, United Kingdom, Germany, Japan, Korea, Sweden, Norway, Switzerland, Hungary, Australia, China, Turkey, Canada, United States, Netherlands, Portugal, Greece, France, Russia, Italy, Spain, Argentina, Brazil, Indonesia, Saudi Arabia). - Guarantees (announced or pledged amounts; country ordering includes Ireland, United Kingdom, Sweden, Austria, Belgium, Germany, Korea, Canada, Australia, Japan, Hungary, Norway, Switzerland, China, Turkey, Netherlands, Spain, France, Portugal, United States, Greece, Russia, Indonesia, Italy, Argentina, Brazil, India, Saudi Arabia). - Distinctions made between "outside Central Bank" and "within Central Bank" and "outside Average" and "within Average" and "Bank supervisor:" markers in charts. *Charts and precise numeric axes (e.g., 0 to 1 or 0 to 250) are presented in the source figures; country orderings and legend distinctions are preserved in the textual representation above.* --- *Source: _wp11250 - Appendix I. Supervision of Banking, Securities, Insurance, and Payments in Surveyed Countries (content as presented in supplied PDF excerpts).* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2011/_wp11250.pdf_