October 24 2016

Comments to the consultation of the European Commission on the review of the EU macro-prudential policy framework

The German Banking Industry Committee (GBIC) took part in the consultation of the European Commission on the review of the EU macro-Prudential policy framework. The consultation took place to gather feedback and evidence on whether the existing EU macro-prudential framework is functioning optimally. The goal of macro-prudential policy was to ensure the stability of the financial system as a whole, which is distinct from the safety and soundness of individual institutions. To this end, whilst the prudential requirements of credit institutions are set at the EU level, a macro-prudential framework is necessary to allow additional flexibility in the setting of these prudential requirements in each Member State. This allows national authorities to address the specific financial stability risks they face, which can be caused by various factors including local imbalances, national laws, and divergent economic cycles. The EU macro-prudential framework has been developed incrementally over recent years. From establishing the European Systemic Risk Board "ESRB", to designing a toolset of instruments (capital buffers, which are enshrined in CRDIV/CRR), and agreeing a system for coordinated action. This framework has been established by different regulations and directives over time. As such, it lacks the coherence that we would expect, were it established by a single legislative text. Increasingly, a number of issues can be raised in the way the various components of this framework interact.

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