The global financial crisis has shifted the focus of market participants and the public to the significance of the stability of the financial system and possible costs that may arise if that stability is threatened. This has encouraged a more rapid development of macroprudential policy at both national and international level. Institutions and regulatory bodies with the mandate to strengthen the stability of the financial system have increased the frequency of adoption and application of measures to reduce systemic risks and maintain and strengthen the stability of the system. Measures aimed at preventing and mitigating financial risks in the system, while contributing to maintaining and strengthening the stability of the financial system as a whole are called macroprudential measures.
The main objectives of macroprudential policy are accomplished through the achievement of the following intermediate macroprudential objectives:
- Mitigating and preventing excessive credit growth and leverage;
- Mitigating and preventing excessive maturity mismatch between funding sources and placements of financial institutions;
- Mitigating and preventing concentration of financial institution exposures to specific sectors or asset classes;
- Limiting the systemic impact of misaligned incentives in terms of favouring certain financial institutions, with a view to reducing moral hazard;
- Strengthening the resilience of financial infrastructure.
The establishment of macroprudential framework is only one of the solutions offered by macroprudential policy makers aiming to regulate this new area in greater detail and bring it closer to the general public.