Macroprudential framework for banks

What is the EU doing and why?

The EU took significant steps to strengthen its macroprudential rules by implementing the standards developed at international level (the Basel III framework of the Basel Committee on Banking Supervision (BCBS)). For instance, it created the European Systemic Risk Board (ESRB) and the European Supervisory Authorities (ESAs) to ensure that financial stability risks – along with other risks  – are being properly monitored across the whole financial system.

The main macroprudential tools for banks are capital buffers (i.e., an additional layer of capital on top of the minimum capital requirements). In addition, national authorities can also tighten the risk weights (i.e., introduce higher capital charges) applied to certain exposures, set stricter liquidity and public disclosure requirements, or limit the size of certain exposures, if justified by systemic risk.

As systemic risks may differ across Member States, national authorities are responsible for introducing national macroprudential measures for banks in their jurisdiction, taking into account the specificities of their banking sectors. National authorities are required to notify the ESRB of their macroprudential measures.

The European Central Bank (ECB) is also responsible for assessing macroprudential measures adopted by national authorities in Member States that are part of the banking union. In certain circumstances, the implementation of national macroprudential measures requires the involvement of different EU bodies (e.g. the European Commission, the ESRB, the European Banking Authority (EBA)), in order to preserve the integrity of the Single Market.

European Systemic Risk Board

European Central Bank on macroprudential measures

European Banking Authority on macroprudential policy