{ "title": "Macro-Prudential Policies: Putting the “Big Picture” into Financial Sector Regulation", "publication": "IMF Blog, October 22, 2010", "sourceUrl": "https://www.imf.org/en/blogs/articles/2010/10/22/macro-prudential-policies-putting-the-big-picture-into-financial-sector-regulation", "canonical": "https://www.imf.org/en/blogs/articles/2010/10/22/macro-prudential-policies-putting-the-big-picture-into-financial-sector-regulation", "overlayPath": "/en/blogs/articles/2010/10/22/macro-prudential-policies-putting-the-big-picture-into-financial-sector-regulation/index.md", "summary": "Publication: John Lipsky, October 22, 2010", "sections": [ { "heading": "Context and consensus", "content": "- Publication: John Lipsky, October 22, 2010\n- The global financial crisis demonstrated that pre-crisis financial regulation “didn’t take the ‘big picture’ of the system as a whole sufficiently into account” and supervisors in many markets “missed the forest for the trees.”\n- There is now broad consensus on the need for macro-prudential regulation, despite the fact that macro-prudential regulation “had been used relatively little” previously and “there are no agreed standards that can be applied internationally.”\n- Post-crisis reforms in traditional micro-prudential regulation have made substantial progress through cooperation in international standard-setting bodies, with improved international accords agreed “in time for the upcoming summit for the leaders of the Group of Twenty industrialized and emerging market economies (G-20) in Seoul.”" }, { "heading": "Macro-prudential conference in Shanghai", "content": "- The Peoples’ Bank of China hosted an IMF-sponsored conference in Shanghai titled Macro-Prudential Policies: Asian Perspectives.\n- The conference brought together central bankers and senior financial officials from Asia and around the world to examine key issues regarding macro-prudential policies and to allow international participants and Fund staff to benefit from the views of key Asian policymakers." }, { "heading": "Aims and objectives of macro-prudential policy", "content": "- Primary objective:\n - “To prevent a crisis like the one just experienced.”\n- Key challenges and objectives identified:\n - Ensure the safety and soundness of the entire financial system and capture how the economic and financial systems affect each other.\n - Detect and respond to the build-up in system-wide risks, not just the condition of individual institutions.\n - Design and implement policies that short-circuit cross-institution or cross-market knock-on effects that magnify problems.\n - Reduce the likelihood that the system as a whole will experience knock-on effects by seeking to dampen swings in credit and financial cycles that produce financial system volatility harmful to financial markets and the broader economy." }, { "heading": "Means of implementation: instruments and design", "content": "- Price-based instruments:\n - A proposed option is a capital surcharge or levy based on the degree of systemic risk created by a specific financial institution—adding a new capital layer to classic micro-prudential minimum capital requirements to reflect systemic importance.\n - Rationale: Modulate institution behavior by making activities that contribute to systemic risk more costly.\n- Quantity-based instruments:\n - Proposals include constraints on size, legal structure, or certain activities by financial institutions.\n - Caution: Quantity-based instruments “may be more subject to gaming and regulatory arbitrage.”\n- Market-focused measures:\n - Because systemic risks refer to markets as well as institutions, measures to make key markets more resilient should be considered." }, { "heading": "Effective implementation through cooperation and institutional design", "content": "- Cross-border coordination:\n - A cooperative solution is required to ensure macro-prudential policies in different countries do not contradict or offset each other.\n - Supervisors need to focus on cross-border exposures.\n - Effective resolution of large, complex, multi-jurisdictional financial institutions requires a clearly-designed cross-border framework to reduce moral hazard and support financial stability.\n - The IMF has proposed a pragmatic approach and “hope[s] a small set of countries that house the most interconnected firms will begin to make progress in this area.”\n- Institutional responsibility:\n - An open question is which agency should design and implement macro-prudential policies—a new global body, a central bank, or the existing micro-prudential regulatory body.\n - Conference participants in Shanghai “favored this job being awarded to central banks.”\n- Conditions for success:\n - Regulators must be supported by:\n - Good information gathering\n - Clear mandates and powers\n - Effective tools\n - Cooperation between authorities nationally and across borders\n\nSource: Macro-Prudential Policies: Putting the “Big Picture” into Financial Sector Regulation, John Lipsky, October 22, 2010.\n\n---\n\n Content in this bundle\n\n- 061110 - Executive Summary\n - 061110 - Executive Summary (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - 061110 - Executive Summary (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- https://www.imf.org/wp-content/uploads/2010/10/lipsky-macro-prudential.jpg\n\nSource: https://www.imf.org/en/blogs/articles/2010/10/22/macro-prudential-policies-putting-the-big-picture-into-financial-sector-regulation" } ], "bullets": [ "[Markdown version](/en/blogs/articles/2010/10/22/macro-prudential-policies-putting-the-big-picture-into-financial-sector-regulation/index.md)", "[Structured JSON version](/en/blogs/articles/2010/10/22/macro-prudential-policies-putting-the-big-picture-into-financial-sector-regulation/index.json)", "[Bundle manifest](/en/blogs/articles/2010/10/22/macro-prudential-policies-putting-the-big-picture-into-financial-sector-regulation/bundle-manifest.json)", "Authors: John Lipsky", "Published: October 22, 2010", "Publication: John Lipsky, October 22, 2010", "The global financial crisis demonstrated that pre-crisis financial regulation “didn’t take the ‘big picture’ of the system as a whole sufficiently into account” and supervisors in many markets “missed the forest for the trees.”", "There is now broad consensus on the need for macro-prudential regulation, despite the fact that macro-prudential regulation “had been used relatively little” previously and “there are no agreed standards that can be applied internationally.”", "Post-crisis reforms in traditional micro-prudential regulation have made substantial progress through cooperation in international standard-setting bodies, with improved international accords agreed “in time for the upcoming summit for the leaders of the Group of Twenty industrialized and emerging market economies (G-20) in Seoul.”", "The Peoples’ Bank of China hosted an IMF-sponsored conference in Shanghai titled Macro-Prudential Policies: Asian Perspectives.", "The conference brought together central bankers and senior financial officials from Asia and around the world to examine key issues regarding macro-prudential policies and to allow international participants and Fund staff to benefit from the views of key Asian policymakers.", "Primary objective:", "Key challenges and objectives identified:", "Price-based instruments:", "Quantity-based instruments:", "Market-focused measures:", "Cross-border coordination:", "Institutional responsibility:", "Conditions for success:", "**061110 - Executive Summary**", "[https://www.imf.org/wp-content/uploads/2010/10/lipsky-macro-prudential.jpg](https://www.imf.org/wp-content/uploads/2010/10/lipsky-macro-prudential.jpg)" ], "related": [ { "title": "061110 - Executive Summary", "role": "document", "sourceUrl": "http://www.imf.org/external/np/pp/eng/2010/061110.pdf", "summary": { "path": "/external/np/pp/eng/2010/061110.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/external/np/pp/eng/2010/061110.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/blogs/articles/2010/10/22/macro-prudential-policies-putting-the-big-picture-into-financial-sector-regulation/index.md", "json": "/en/blogs/articles/2010/10/22/macro-prudential-policies-putting-the-big-picture-into-financial-sector-regulation/index.json", "bundleManifest": "/en/blogs/articles/2010/10/22/macro-prudential-policies-putting-the-big-picture-into-financial-sector-regulation/bundle-manifest.json" }, "generatedAtUtc": "2026-08-28T14:28:29.356Z" }