Elements of Effective Macroprudential Policies
The joint International Monetary Fund (IMF), FSB and Bank for International Settlements (BIS) document responds to a G20 request to take stock of the lessons learned from national and international experience on the development and implementation of macroprudential policies.
Following the global financial crisis, many countries have introduced frameworks and tools aimed at limiting systemic risks that could otherwise disrupt the provision of financial services and damage the real economy. Such risks may build-up over time or arise from the structural vulnerabilities associated with interconnectedness and the distribution of risk within the financial system.
Experience with macroprudential policy is growing, and a large number of countries have put in place dedicated institutional arrangements. Progress is also being made with the design and implementation of macroprudential tools, complemented by an increasing body of empirical research on the effectiveness of macroprudential tools. However, the experience gained does not yet span a full financial cycle, so the evidence remains tentative. The wide range of institutional arrangements and policies being adopted also suggests there is not a ‘one-size-fits-all’ model. Nonetheless, based on accumulated experience, the paper documents a number of elements that have been found useful for macroprudential policy making in the following areas: the definition, objectives and scope of macroprudential policy; institutional arrangements (including mandates, governance, powers and arrangements for domestic cooperation); operational considerations (such as the selection of policy tools and their employment); and issues related to international consistency of macroprudential policies.