Macroprudential policy
15 important questions on Macroprudential policy
What three pillar do we need for a strong banking union?
- Single supervisory Mechanism (Nov 2014). In order to supervise you first need a comprehensive assessment of the banks. (stress testing and asset quality review (AQR))
- Single Resolution Mechanism & Fund (2016)
- Single Deposit Guarantee Scheme (?)
What were the policies to en too-big to fail banks?
- Reduce probability of default (1. Basel III, 2. Macro-prudential buffers (additional buffers to protect for cyclical cash flows), 3. stress testing)
- Reduce the loss give default ( 1. development of recovery & resolution strategies. 2. enabling of bail-in(a bail in forces the borrowers creditors to bear some of the burden by having part of the debt they are owed written off.
What is a bail-in and how does it cover for bank failure? How much should it be?
- Higher grades + faster learning
- Never study anything twice
- 100% sure, 100% understanding
For my 1st exam I got a C. Then, I started looking for ways to learn better and I came across Study Smart. Since then I have scored a A+, A, A- and another A. I highly recommend it to everyone who wants to hear it. I am so happy with it!!
I was struggling to finish all my first-year subjects for 3 years. Then I discovered Study Smart, which helped me to finish all of them within 3 months.
Because of StudySmart, things are going well in many ways. Before, I always had study stress and no time for anything. Now I feel calm and confident (because of the program). I used to score a B, now I usually score an A or A+.
Hey Chris, I really want to thank you very much for developing the platform, I usually got around C for my exams, now I scored an A+, an A and a A- !!
Since using Study Smart, my average has increased significantly. I even completed a statistics course with a A+ while I'm bad at statistics. I took on extra courses this year, because of Study Smart. Thanks so much!
Ever since I started studying with StudySmart I passed all my exams !!! No more re-sits!! At first, I was happy with a pass and now I only get good grades. Many thanks!
I aced all the courses I studied with Study Smart. For law, I first scored a D, and now an A! I’m 100% sure that I’ll pass all the courses I study with Study Smart.
I always thought I studied well. My grades were fine. I could never have imagined that applying these study skills would have such a huge and direct impact on my grades, my speed and the pleasure I have in learning.
For the first time, I finally feel totally confident about the way I learn. I have the perfect overview and make great progress in terms of speed and the grades I get. Thanks, Chris!
I immediately started to enjoy learning again, and my grades soared. All of a sudden, everything went better. I highly recommend Study Smart to all students..
Being able to create my materials online made the process of studying so much smoother and quicker. I no longer have to spend a huge amount of my time on creating my summaries.
At first, my notes were a mess. Now I use Study Smart to take my notes in a perfectly structured way. It helps me to save a lot of time and do other things I enjoy.
Students that study with Study Smart get better grades. The system applies all the learning methods in such a way that both well-performing students and students who struggle perform much better.
Hi Chris, I would like to thank you very much. Last year I scored C on a course, and this year I got an A+ thanks to your method! Thank you very much!
The largest effect is that my child is more enthusiastic about school! Every parent wants their children to be happy at school, Study Smart made it happen.
In high school, I failed several exams, and that has really changed now. I actually needed this tool very much back then. Since I started studying with StudySmart, I haven't had any D's. My average score is now an A and those are results I would have never had in the past
With my old method, I passed only 3 out of 8 courses. Since I started taking my notes digitally in Study Smart, I have passed all my courses on the first try. For me, StudySmart takes away the stress of wondering if I will pass or not.
Thanks to StudySmart, I passed all my exams, and with better grades than before! On top of that, I have mastered a very good study method now, which I am confident will help me earn my degree.
What is macro prudential policy? How does it differ from micro prudential regulation? 1. Policy objective, 2. Goal. 3. Risk characteristic, Correlations across firms, Calibration of prudential controls.
- Policy objective: Limit financial distress system ( micro: individual firms)
- Ultimate goal: Avoid output (GDP) costs linked to financial instability ( micro: consumer protection)
- Characterisation of risk: (Dependent on collective behaviour; endogenous (micro: independent of individual agents: exogenous)
- Correlations and common exposures across firms: important (micro irrelevant)
- Calibration of prudential controls: In terms of system wide-risk, top down (micro: in terms of firm risk: bottom up)
What are the the macro prudential instruments for the systemic risk of excessive credit growth & leverage? and trough which transmission channels do they operate?
- Counter cyclical capital buffers
- Time varying (Leverage ratio, Risk weights)
- Loan-to-value / loan-to-income caps
The transmission channel for counter cyclical capital buffers and Time varying leverage and risk ratios that the resilience of banks contribute to curbing excessive (sectoral credit growth). ???
The transmission channel for loan-to-value and loan-to-income is the resilience of borrowers and banks, mitigate pro-cyclicality mortgage credit.???
What are the key instruments and transmission channel of the systemic risk of excessive maturity mismatch?
- Stable funding restrictions (Net Stable Funding Ratio (NSFR) and (LTD)
- Liquidity charges
The transmission channel is the resilience of funding base to stressed outflows
What is the key instruments and transmission channel of the systemic risk of exposure to concentration?
- The Key instrument is large exposure restrictions ( by counterparty, sector, geographic)
The transmission channel is resilience to counterparty and concentration sectors
What is the key instruments and transmission channel of the systemic risk of exposure to TBTF?
- The key instrument is SIFI (systemically important financial institution) capital surcharges
The transmission channel: lower the probability and impact of failure of SIFIs; increased resilience of banks. There is a high loss given default so you want to lower the probability of default
There are a lot of examples or national macropruedential tools. Name 5 examples:
- Leverage ratios
- mortgage risk weight floors
- restrictions on trading activities
- systemic risk buffer largest banks
- limits for new lending (loan-to-value, loan-to-income
- Countercycilical Capital Buffers CCB (1-3%)
Why do banks in the Netherlands have particularly high LTV ratios?
- Banks in the Netherlands have long save assets (because of the hypotheek garantie stelsel)
- People have large defined benefit pensions
Why would it be inefficient to encourage people to have both a defined benefit pension and a house?
Why does debt overhang reduce labour mobility?
How does the boom-bust cycle impact intergenerational wealth distribution?
Looking at the credit cycles, would tat call for national or european macro-prudential policies?
What are the policy lessons we have learned so far from the crisis?
- national discretion needed for different structural risks
- Leverage ratio and risk weights: belt and suspender
- Avoid household debt problems before they arise (use LTVs)
- Excessive mortgages credit is a problem for households and the economy; less so for banks (Use LTV)
- Time-varying measures (Like CCB) can build buffers in upturns enhance resilience against downturns.
The question on the page originate from the summary of the following study material:
- A unique study and practice tool
- Never study anything twice again
- Get the grades you hope for
- 100% sure, 100% understanding
