The EU macro-prudential policy
framework : state of play and
challenges ahead
Banco do Portugal
Conference on Financial Stability and macro-prudential policy
10 February 2015
Aliénor Margerit
European Commission
The views expressed in this document are those of the
authors and may not in any circumstances be regarded
as stating an official position of the European
Commission.
Macro-prudential policy: a new addition to the EU
regulatory framework
 The 2009 De Larosière Report
 Gaps in the supervisory framework
 No 'big picture' approach
 Need for macro-prudential oversight at EU level
 Establishment of the European Systemic Risk Board (ESRB)
in 2010
 Mandate defined in broad terms, 'comply or explain' mechanism
 Field of competence = unchartered territory (no equivalent at national level at the
time)
 Macro-prudential policy is essential at the current juncture
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In particular in the Euro Area (single monetary policy)
Unconventional monetary policy
Real estate bubbles
Smoothen the cycle and enhance resilience
 MS are actively using macro-prudential instruments
 83 measures have been notified to the ESRB since January 2014
The current regulatory framework is the result of a
piecemeal approach
ESRB
(2010)
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Macro-prudential 'hub' with
no binding powers
Authoritative body attached
to the ECB and chaired by
its president
Comprises the EU central
banks, supervisors and the
Commission
Broad mandate: forwardlooking, cross-sectoral, EUwide
No equivalent at national
level at the beginning
Has called for the setting up
of
national
macro-pru
authorities (ESRB reco. of
2012)
CRD IV/CRR
(January
2014)
 5 macro-prudential capital
buffers: CCB, SRB, G-SII, OSII, macro-pru pillar 2
 'Flexibility clause': possibility
to impose stricter
requirements at national level
 Designated authorities or
competent authorities at
national level can activate the
tools
 Various procedures depending
on the legal base, scope and
calibration of the instruments
(ESRB, EBA, Commission and
even Council can be involved)
SSM
(November
2014)
 Article 5 SSM Regulation:
ECB/SSM entrusted with
binding macro-prudential
competences
 Three limitations :
 Only in the Banking
Union
 Tools in EU law (i.e.
CRD IV/CRR)
 Asymmetric powers :
the ECB can top-up
measures imposed by
national authorities
The ESRB
Steering Committee (14 members)
7 central bank
representatives
Vice-President of the
ECB
4 national central bank
governors
1 European
Commission
representative
3 representatives of
the ESAs
2 representatives of
the ATC and ASC
EBA Chairperson
EIOPA Chairperson
ESMA Chairperson
Member of the
European Commission
1 representative of
the EFC
Chair of the ATC
Chair of the ASC
President of the EFC
Assists in the decision-making process
General Board (67 members) - decision making body
30 central bank
representatives
President and Vice
President of the ECB
28 national central
bank governors
1 European
Commission
representative
Member of the
European Commission
3 representatives of
the ESAs
EBA Chairperson
EIOA Chairperson
ESMA Chairperson
4 representatives of
the ATC and ASC
Chair of the ATC
Chair of the ASC
2 Vice-Chairs of the
ASC
28 representatives
of the NSAs
Usually, chairpersons
of the national
supervisory authorities
38 voting members
President of the EFC
29 non-voting members
Advise and assist
ATC (64 members)
ASC (16 members)
Chair of the ATC
15 external experts
1 representative of
the EFC
28 national central bank representatives
1 ECB representative
2 European Commission representatives
1 ASC representative
ESRB Secretariat
Analytical, statistical, administrative and logistical support for all bodies
28 NSA representatives
3 ESA representatives
1 EFC representative
CRD IV/CRR macro-prudential rules and instruments
The Banking Union dimension
 Warnings and recommendations
 Guidance and opinions on the use
of macro-prudential tools (CRD
IV/CRR)
 Can top-up measures imposed by
national authorities; Instruments
in EU law only
 Primary responsibility for the use
of macro-prudential tools
 Instruments foreseen in EU law
(CRD IV/CRR) and other
instruments (LTV, LTI, Loan-to
deposit, etc…)
6
State of play: 83 macro-pru measures notified to the
ESRB since January 2014 by 18 MS
Member State
Measures
BE
Pillar 2, RW
BG
CB, SRB
HR
CB, CCB, RW, SRB
CZ
CB, CCB, SRB
DK
CCB, O-SII, Pillar 2, SRB, LGD
EE
CB, DSTI, LTV, SRB, housing loan maturity limits
FI
CB
HU
DSTI, liquidity ratio, LTV
IE
LTV, LTI, RW
LV
CB
LT
LTV, DSTI, housing loan maturity limits
LU
CB, RW, stress test
NL
LTV, RW, SRB, O-SII, loan amortisation
RO
LTV, RW, DSTI, stress test, consumer loan maturity limits
SK
CB, CCB, LTV, loan maturity limits, loan amortisation, stress test
SI
LTD, Pillar 2
SE
CB, CCB, liquidity ratio, LTV, Pillar 2, SRB, loan amortisation
UK
CCB, leverage ratio, LTI, RW, stress test
7
Challenges ahead: make the system work !
 Too complex ?
 Diverse procedures for similar tools not integrating well the Banking
Union dimension
 ESRB ill equipped to oversee the SSM/ECB in its supervisory capacity
 National macro-pru authorities are not represented at EU/EA level
 Cross-border coordination framework remains underdeveloped
 Effectiveness?
 ESRB governing bodies too large?
 Asymmetric powers of the ECB (can only top-up national measures)
may lead to procyclical bias in a downturn
 MS tend to choose the tools on the basis of the procedure (often so as
not to trigger consent requirements) and not content
 Transparency and accountability?
 Difficult for banks to keep track of the measures
 Multiplicity of authorities involved and complexity of the framework may
blur responsibilities
A heterogeneous situation at national level
10
Transparency ?
Source: Commission services, ESRB
Notes: (i) the Capital conservation buffer will become mandatory from 1 January 2016 in all MS, but has been introduced early
in BG, CZ, HR, EE, FI, LV, LU, SK and SE; (ii) the SRB has been set at 2% for all banks in EE and at up to 3% in the other MS applying it (either
to all or to a subset of banks); (iii) the UK has reciprocated the CCB set at 1% by SE and NO, but this is not indicated in the
graph as only applying to a relatively small amount of exposures
Time to review ?
 The review of the texts : a legal requirement
 ESRB founding regulations : Article 20 / Article 8
 CRD IV/CRR macro-pru rules and tools : Article 513 CRR
 SSM Reg/ Macro-prudential powers of ECB/SSM: Article 32 (d)
 The timelines of the review clauses are not aligned :
 ESRB founding Regulations : December 2013
 CRD IV/CRR macro-prudential rules and tools : December 2014
 SSM macro-prudential tasks and tools : December 2015
 What has been done so far ?
 ESRB : Commission report based on stakeholders consultation
published in August 2014
 CRD IV/CRR macro-prudential instruments :ESRB and EBA have
provided their opinions (in April and June 2014 resp.)
 SSM : not started yet
Conclusion
 Macro-prudential policy is a relatively new addition to
the EU regulatory framework
 Macro-prudential policies are very useful, in particular
at the current juncture and MS have started to use
them actively (targeting mainly real estate risk or the
too-big-to-fail issue)
 The EU macro-prudential framework is the result of a
piecemeal approach
 Review ? The case for a comprehensive approach.
Thank you for your attention!