Macroprudential Policy, Capital Controls and Bank Systemic Risk

Adrian Blundell-Wignall and Caroline Roulet

Chapter 9 in The Limits of Surveillance and Financial Market Failure, 2014, pp 108-130 from Palgrave Macmillan

Abstract: Abstract The first references to macroprudential policy were in closed meetings, such as in the Cooke Committee in 1979,2 which was the forerunner of the Basel Committee of Banking Supervisors (BCBS). The chairman noted that microprudential issues were being interfaced with macroprudential issues. The concern was about bank lending globally in the face of high oil prices. He attempted to draw the boundary of supervisory interest as not in the macroeconomic problems per se but how the latter had (and could) lead to bank problems that are not treatable with microregulation. Lamfalussy around the same time explained that macroprudential issues are problems that bear on the market as a whole, and may not be obvious in individual banks at the microprudential level. The first public appearances of the term were in the Euro-currency Standing Committee report and in the Cross Report of the Bank for International Settlements (BIS) (1986), where it merits an entire chapter. The introduction to the report launches into bank risks that are related to innovations, capital markets banking, derivatives, securitization, large bank off-balance-sheet responses to investment banks, liquidity risk and the underpricing of risk. These developments might cause concerns — such as technology failures, the evaporation of liquidity in a crisis situation, and problems with counterparty risk that could have macroconsequences and negative feedback loops on the macroeconomy.

Keywords: Monetary Policy; Capital Control; Forward Market; Shadow Bank; Macroprudential Policy (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1057/9781137471475_9

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