Macroprudential and Microprudential Policies: Toward Cohabitation

Staff Discussion Notes, June 21, 2013

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Effective arrangements for micro and macroprudential policies to further overall financial stability are strongly desirable for all countries, emerging or advanced.
The note clarifies the essential features of macroprudential and microprudential policies and their interactions, delineates their borderline, and proposes mechanisms for aligning both policies in the pursuit of financial stability.
The note provides general guidance; actual arrangements will need to take into account country-specific circumstances, reflecting that there is no “one size fits all.”

Macroprudential and microprudential policies complement each other but can have potential areas of overlap and conflict that complicate cooperation.
Organizing the close interactions between the two policy sets can help contain potential tensions.
Identifying elements desirable for effective cooperation is central to aligning both policies toward financial stability.

Propose mechanisms for aligning macroprudential and microprudential policies in pursuit of financial stability by identifying desirable elements for effective cooperation.
Emphasize that institutional arrangements and operational practices should reflect country-specific circumstances; no single blueprint fits all jurisdictions.

authorities' policy action, capital buffer, central bank, condition market expectation, Countercyclical capital buffers, financial cycle, Financial sector stability, financial stability, macroprudential authority, macroprudential policy, microprudential policy, policy action, policy debate, policy framework, policy impasse, Policy mandate, risk assessment, SDN, supervision, Systemic risk