{
  "title": "Macroprudential Policy—Filling the Black Hole",
  "publication": "IMF Blog, April 8, 2011",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2011/04/08/macroprudential-policy-filling-the-black-hole",
  "canonical": "https://www.imf.org/en/blogs/articles/2011/04/08/macroprudential-policy-filling-the-black-hole",
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  "summary": "Author: José Viñals",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Author: José Viñals\n- Date: April 8, 2011\n- Main message: The global financial crisis revealed a \"gaping hole\" in policy toolkits. Macroprudential policy is intended to contain system-wide risks in the financial sector and requires a coherent framework, new tools, and stronger international cooperation."
    },
    {
      "heading": "Systemic risk indicators and policy tools",
      "content": "- Systemic risk indicators focus on system-wide risks (not individual institutions) and include:\n  - resilience of the financial system to shocks\n  - availability of funding in financial markets\n  - market participants’ interconnectedness\n  - household indebtedness\n  - international capital flows\n- Policy tools listed include:\n  - countercyclical capital requirements\n  - loan-to-value ratios to address housing bubbles\n  - systemic capital and liquidity surcharges reflecting institutions’ contribution to systemic risk"
    },
    {
      "heading": "Progress reported and evidence needs",
      "content": "- IMF Executive Board discussed a new IMF paper describing main elements of macroprudential policy.\n- The paper draws on a survey of 63 member countries.\n- The paper and Board discussion indicate:\n  - significant progress has been made, but unevenly\n  - further efforts are needed to develop new tools and broader, forward-looking measures of systemic risk\n  - a policy framework based on international best practices is needed to reduce regulatory arbitrage by global financial firms\n- Open empirical questions highlighted:\n  - How strong is the evidence that macroprudential policies can prevent or contain asset price bubbles?\n  - Which policy tool—or combination of tools—should be used?\n  - How to manage conflicts with monetary and fiscal objectives?\n  - Which institutions are best placed to detect and contain systemic risks?"
    },
    {
      "heading": "Policy objectives and roles",
      "content": "- Macroprudential policy complements (and differs from) traditional macroeconomic policies and micro-prudential measures by focusing on the health of the financial system as a whole.\n- Two interrelated drivers of systemic risk that new tools would target:\n  - (i) risks associated with swings in credit and liquidity cycles driven by pro-cyclical forces such as leverage and herding behavior by financial institutions, non-financial firms, and households\n  - (ii) concentration of risk in highly interconnected financial institutions and markets within and across national borders"
    },
    {
      "heading": "Challenges and recommended actions for policymakers",
      "content": "- Key tasks identified:\n  - Create a comprehensive analytical framework and a consistent set of policy tools, including through rigorous back-testing.\n  - Establish macroprudential authorities with clear mandates to enhance accountability and reduce the risk of political pressure; institutional arrangements should reflect country-specific characteristics.\n  - Assure addressing all systemic risks and manage potential policy conflicts through cooperation among national authorities.\n  - Increase international cooperation to ensure the consistent application of national macro-prudential policies.\n- The IMF commits to support such efforts through its surveillance mandate and financial sector expertise."
    },
    {
      "heading": "International process and next steps",
      "content": "- The G-20 requested the IMF, FSB, and BIS to develop a coherent macroprudential policy framework.\n- The author anticipates a joint IMF-FSB-BIS progress report on the new macroprudential policy framework to be discussed at the G-20 Summit in November 2011.\n- Closing argument: collective efforts to \"fill the policy black hole\" are framed as the best chance of avoiding future crises.\n\nSource: IMF Blog post \"Macroprudential Policy—Filling the Black Hole\" by José Viñals, April 8, 2011. The IMF is an organization of 191 countries.\n\n---\n\n Content in this bundle\n\n- Macroprudential Policy: An Organizing Framework; IMF Policy Paper; March 14, 2011\n  - Macroprudential Policy: An Organizing Framework; IMF Policy Paper; March 14, 2011 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Macroprudential Policy: An Organizing Framework; IMF Policy Paper; March 14, 2011 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Macroprudential Policy: An Organizing Framework--Background Paper; IMF Policy Paper; March 14, 2011\n  - Macroprudential Policy: An Organizing Framework--Background Paper; IMF Policy Paper; March 14, 2011 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Macroprudential Policy: An Organizing Framework--Background Paper; IMF Policy Paper; March 14, 2011 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- macroprudential policy measures\n\nSource: https://www.imf.org/en/blogs/articles/2011/04/08/macroprudential-policy-filling-the-black-hole"
    }
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    "Authors: Jose-Vinals",
    "Published: April 8, 2011",
    "Author: José Viñals",
    "Date: April 8, 2011",
    "Main message: The global financial crisis revealed a \"gaping hole\" in policy toolkits. Macroprudential policy is intended to contain system-wide risks in the financial sector and requires a coherent framework, new tools, and stronger international cooperation.",
    "Systemic risk indicators focus on system-wide risks (not individual institutions) and include:",
    "Policy tools listed include:",
    "IMF Executive Board discussed a new IMF paper describing main elements of macroprudential policy.",
    "The paper draws on a survey of 63 member countries.",
    "The paper and Board discussion indicate:",
    "Open empirical questions highlighted:",
    "Macroprudential policy complements (and differs from) traditional macroeconomic policies and micro-prudential measures by focusing on the health of the financial system as a whole.",
    "Two interrelated drivers of systemic risk that new tools would target:",
    "Key tasks identified:",
    "The IMF commits to support such efforts through its surveillance mandate and financial sector expertise.",
    "The G-20 requested the IMF, FSB, and BIS to develop a coherent macroprudential policy framework.",
    "The author anticipates a joint IMF-FSB-BIS progress report on the new macroprudential policy framework to be discussed at the G-20 Summit in November 2011.",
    "Closing argument: collective efforts to \"fill the policy black hole\" are framed as the best chance of avoiding future crises.",
    "**Macroprudential Policy: An Organizing Framework; IMF Policy Paper; March 14, 2011**",
    "**Macroprudential Policy: An Organizing Framework--Background Paper; IMF Policy Paper; March 14, 2011**",
    "[macroprudential policy measures](http://blogs.imf.org/2010/10/22/macro-prudential-policies-putting-the-%e2%80%9cbig-picture%e2%80%9d-into-financial-sector-regulation/)"
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