This article examines the evolution of the mandate and tasks of the European Central Bank (ECB) in the field of financial stability since its establishment in 1998. Over this period, the significance of the ECB’s financial stability function has increased markedly, in parallel with the growth of macroprudential policy and driven by the institutional reforms stemming from the creation of the European Systemic Risk Board in 2010 and the start of the Single Supervisory Mechanism (SSM) in 2014. To carry out its tasks, the ECB has a Financial Stability Committee, which is made up of representatives of the central banks and banking supervisory authorities of the SSM area – including the Banco de España – , that acts as an internal forum for the ECB’s governing bodies to prepare issues relating to the analysis of risks and vulnerabilities and national macroprudential policies in the banking union. Lastly, an overview is provided of the main ECB publications and public interventions in this field.
{"title":"The European Central Bank and financial stability: a quarter of a century of evolution and transformation (1998-2023)","authors":"Luis Gutiérrez de Rozas","doi":"10.53479/33799","DOIUrl":"https://doi.org/10.53479/33799","url":null,"abstract":"This article examines the evolution of the mandate and tasks of the European Central Bank (ECB) in the field of financial stability since its establishment in 1998. Over this period, the significance of the ECB’s financial stability function has increased markedly, in parallel with the growth of macroprudential policy and driven by the institutional reforms stemming from the creation of the European Systemic Risk Board in 2010 and the start of the Single Supervisory Mechanism (SSM) in 2014. To carry out its tasks, the ECB has a Financial Stability Committee, which is made up of representatives of the central banks and banking supervisory authorities of the SSM area – including the Banco de España – , that acts as an internal forum for the ECB’s governing bodies to prepare issues relating to the analysis of risks and vulnerabilities and national macroprudential policies in the banking union. Lastly, an overview is provided of the main ECB publications and public interventions in this field.","PeriodicalId":293022,"journal":{"name":"Financial Stability Review","volume":"84 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-05-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139372426","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The notes to financial statements and, in the case of credit institutions, Pillar 3 reports complete and supplement information contained in the balance sheet and income statement. This helps to provide a better estimate of the amount and timing of expected cash flows, and of the associated risks. The climate change challenge introduces new factors that affect the materialisation of those risks, and standards are being developed, from different vantage points and by various organisations, aiming to specify the type of public information –in addition to the notes to financial statements and Pillar 3 reports –that could provide a better picture of these factors. This article presents an overview of the initiatives under way to address the disclosure of climate-related financial risks, focusing on the main international work streams promoted by the International Financial Reporting Standards Foundation, the European Financial Reporting Advisory Group and the US Securities and Exchange Commission. It sets out the context and rationale behind the proposals, their current status and their main content. It also discusses the mechanisms being considered to make the initiatives interoperable and to link this type of information with that provided in the financial statements, in order to prevent fragmentation that could affect financial stability.
{"title":"Climate change, financial risks and reporting: distant horizons?","authors":"Covadonga Martínez, Pablo Pérez Rodríguez","doi":"10.53479/33797","DOIUrl":"https://doi.org/10.53479/33797","url":null,"abstract":"The notes to financial statements and, in the case of credit institutions, Pillar 3 reports complete and supplement information contained in the balance sheet and income statement. This helps to provide a better estimate of the amount and timing of expected cash flows, and of the associated risks. The climate change challenge introduces new factors that affect the materialisation of those risks, and standards are being developed, from different vantage points and by various organisations, aiming to specify the type of public information –in addition to the notes to financial statements and Pillar 3 reports –that could provide a better picture of these factors. This article presents an overview of the initiatives under way to address the disclosure of climate-related financial risks, focusing on the main international work streams promoted by the International Financial Reporting Standards Foundation, the European Financial Reporting Advisory Group and the US Securities and Exchange Commission. It sets out the context and rationale behind the proposals, their current status and their main content. It also discusses the mechanisms being considered to make the initiatives interoperable and to link this type of information with that provided in the financial statements, in order to prevent fragmentation that could affect financial stability.","PeriodicalId":293022,"journal":{"name":"Financial Stability Review","volume":"131 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-05-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139372706","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Rebeca Anguren, José García Alcorta, Lucas García Calvo, Diego Hernández García, Eva Valdeolivas
The growth of crypto-assets in recent years, their potential use as a means of exchange or saving, and their possible risks to financial stability, arising, among other things, from their interconnections with the banking sector, have drawn the attention of national and international authorities. In terms of the regulation of these assets, of note at the European level is the European Union’s proposal for a regulation on markets in crypto-assets, which establishes a regulatory framework for all those crypto-assets that currently lie outside the scope of the European Union’s existing regulation on financial services. As regards their treatment in the banking sector, in December 2022 the Basel Committee on Banking Supervision published the global standard on the prudential treatment of banks’exposures to crypto-assets. In this article we review the main characteristics of these two regulatory developments, which are essential for the future of the crypto-asset ecosystem’s relationship with the traditional financial world.
{"title":"Crypto-asset regulation in the current international and European framework","authors":"Rebeca Anguren, José García Alcorta, Lucas García Calvo, Diego Hernández García, Eva Valdeolivas","doi":"10.53479/33798","DOIUrl":"https://doi.org/10.53479/33798","url":null,"abstract":"The growth of crypto-assets in recent years, their potential use as a means of exchange or saving, and their possible risks to financial stability, arising, among other things, from their interconnections with the banking sector, have drawn the attention of national and international authorities. In terms of the regulation of these assets, of note at the European level is the European Union’s proposal for a regulation on markets in crypto-assets, which establishes a regulatory framework for all those crypto-assets that currently lie outside the scope of the European Union’s existing regulation on financial services. As regards their treatment in the banking sector, in December 2022 the Basel Committee on Banking Supervision published the global standard on the prudential treatment of banks’exposures to crypto-assets. In this article we review the main characteristics of these two regulatory developments, which are essential for the future of the crypto-asset ecosystem’s relationship with the traditional financial world.","PeriodicalId":293022,"journal":{"name":"Financial Stability Review","volume":"64 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-05-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139372592","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1900-01-01DOI: 10.4337/9781849808712.00017
C. Borio
There is now a widespread recognition in the policy community of the need to strengthen the macroprudential orientation of financial regulatory and supervisory frameworks. At the same time, the usage of the term “macroprudential” remains ambiguous. This essay summarises the specific definition and characterisation of the term that was developed in the early 2000s at the BIS and outlines the policies needed for implementing the approach. The policies are discussed with reference to two dimensions of the approach. The first is the cross-sectional dimension and is concerned with how aggregate risk is distributed in the financial system at a given point in time. The policy issue here is how to calibrate prudential instruments so as to address common exposures across financial institutions and the contribution of each institution to system-wide tail risk. The second is the time dimension and is concerned with how aggregate risk evolves over time. The policy issue is how to dampen the inherent procyclicality of the financial system, seen as a key source of financial instability. The essay also briefly considers the implications of the adoption of a macroprudential approach for the institutional set-up.
{"title":"Implementing the macroprudential approach to financial regulation and supervision","authors":"C. Borio","doi":"10.4337/9781849808712.00017","DOIUrl":"https://doi.org/10.4337/9781849808712.00017","url":null,"abstract":"There is now a widespread recognition in the policy community of the need to strengthen the macroprudential orientation of financial regulatory and supervisory frameworks. At the same time, the usage of the term “macroprudential” remains ambiguous. This essay summarises the specific definition and characterisation of the term that was developed in the early 2000s at the BIS and outlines the policies needed for implementing the approach. The policies are discussed with reference to two dimensions of the approach. The first is the cross-sectional dimension and is concerned with how aggregate risk is distributed in the financial system at a given point in time. The policy issue here is how to calibrate prudential instruments so as to address common exposures across financial institutions and the contribution of each institution to system-wide tail risk. The second is the time dimension and is concerned with how aggregate risk evolves over time. The policy issue is how to dampen the inherent procyclicality of the financial system, seen as a key source of financial instability. The essay also briefly considers the implications of the adoption of a macroprudential approach for the institutional set-up.","PeriodicalId":293022,"journal":{"name":"Financial Stability Review","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126647013","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1900-01-01DOI: 10.4324/9780203126981-16
J. Rochet
The recent subprime crisis has brought back to light proposals to regulate banks’ liquidity as a complement to solvency regulations. Based on recent academic research, I suggest that liquidity regulations might indeed be a way to limit the pressure on Central Banks in favour of liquidity injections during crisis periods. Another crucial question is the allocation of responsibilities between the Central Bank, the Banking Supervisors and the Treasury in the management of banking crises.
{"title":"Liquidity regulation and the lender of last resort","authors":"J. Rochet","doi":"10.4324/9780203126981-16","DOIUrl":"https://doi.org/10.4324/9780203126981-16","url":null,"abstract":"The recent subprime crisis has brought back to light proposals to regulate banks’ liquidity as a complement to solvency regulations. Based on recent academic research, I suggest that liquidity regulations might indeed be a way to limit the pressure on Central Banks in favour of liquidity injections during crisis periods. Another crucial question is the allocation of responsibilities between the Central Bank, the Banking Supervisors and the Treasury in the management of banking crises.","PeriodicalId":293022,"journal":{"name":"Financial Stability Review","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133603279","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 1900-01-01DOI: 10.23943/princeton/9780691145235.003.0004
M. Dewatripont, J. Rochet
This article suggests some reforms of regulatory architecture for the treatment of distressed banks. Our main recommendations are: • a special bankruptcy regime for banks should be implemented ; • strong, truly independent supervisory agencies should be established ; • the incentives of the top managers of distressed banks should not be kept unchecked ; • procyclicality of solvency regulations should be dampened by the introduction of “automatic stabilisers” ; • one should move toward centralised supervision in economic areas which are meant to be integrated.
{"title":"The treatment of distressed banks","authors":"M. Dewatripont, J. Rochet","doi":"10.23943/princeton/9780691145235.003.0004","DOIUrl":"https://doi.org/10.23943/princeton/9780691145235.003.0004","url":null,"abstract":"This article suggests some reforms of regulatory architecture for the treatment of distressed banks. Our main recommendations are: • a special bankruptcy regime for banks should be implemented ; • strong, truly independent supervisory agencies should be established ; • the incentives of the top managers of distressed banks should not be kept unchecked ; • procyclicality of solvency regulations should be dampened by the introduction of “automatic stabilisers” ; • one should move toward centralised supervision in economic areas which are meant to be integrated.","PeriodicalId":293022,"journal":{"name":"Financial Stability Review","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116032487","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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