ERSB report gives an overview of macro-prudential policy

The European Systemic Risk Board (ESRB) has published a flagship report aimed at policy makers, which gives an overview of the new macro-prudential policy framework in the EU and provides an overview on how to operationalise the new macro-prudential instruments.  

The report is accompanied by a more detailed handbook which assists macro-prudential authorities in the use of the new instruments.  The report looks ahead and sets key strategic directions for macro-prudential authorities which include improving the availability, quality and comparability of data used for macro-prudential purposes. 

The important data gaps that hamper the development of key indicators have been identified in the handbook.  The ESRB noted that there persisted large differences with respect to availability, coverage and definitions of data across the EU.  Specific areas for progress are the following:

·         improving the availability, quality and comparability of data related to the real estate sector, particularly in the context of commercial real estate, for which data is particularly weak.  Given the importance of regional developments in the real estate sector, policy-makers should also be able to monitor such developments and consider measures to prevent them from developing into a systemic risk;

·         improving the availability, quality and comparability of data on key indicators, such as LTV and LTI/DSTI ratios.  This is important in terms of cross-border comparability of data for systemic risk assessments and indicator selection.  It would also facilitate cross-country comparisons of lending standards in the real estate sector; and

·         having a better overview of funding flows across the financial system as a whole.  Liquidity risk was at the heart of the global financial crisis.  But many data gaps prevent monitoring financial flows across the financial system.  International and European efforts are underway to address such gaps, but much remains to be done.

Related links: 

http://www.esrb.europa.eu/pub/pdf/other/140303_flagship_report.pdf?da05cbbb1523291c04dd734b384916c0

http://www.esrb.europa.eu/pub/pdf/other/140303_esrb_handbook.pdf?5685baf4054524bf351e91880f3c2de6