An Overview of Micro- and Macroprudential Policy Tools in the EU in the Times of the COVID-19 Pandemic Economic Shock

Abstract

The fi nancial crisis from 2008 and the following Eurozone crisis from 2012 created an incentive to establish a system of fi nancial supervision at the European Union (“EU”) level, due to the fact that the policy tool commonly used turned out to be ineffective. With regards to banking supervision, the package of legislations: “CRR/CRD” and “BRRD” has been adopted as a response to fi nancial system shortcomings, in order to make it more resilient and harmonised. One of the challenges was to take control of the so-called: “too big to fail” fi nancial institutions, therefore next to macroprudential supervision, microprudential policy pools were introduced. This constituted the phenomena of the shift from regulationbased supervision to risk-based supervision with the aim of reducing the systemic risk in each and every EU Member State and, in turn, prevent possible future crises. In this paper, those methods will be gathered, presented, and discussed in the light of the current COVID-19 pandemic crisis.