Abstract
The article deals with the analysis of a relationship between macroprudential and microprudential policy on a general level and on an example of regulatorily required structure and volume of bank capital. Regulatory requirements and supervisory methods are described in connection with the institutional structure of regulation and supervision within the European economic area. An attention is paid to the development of supervision on an individual basis through consolidated supervision to supplementary supervision of financial conglomerates, which corresponds with the activity and structure of the financial sector, high rate of integration and transboundary action of financial groups headed by a bank. The European System of Financial Supervision and Single Supervisory Mechanism are presented. Development of the regulation of bank capital is analysed. The original microprudential approach is mentioned that involved macroeconomic impacts from its introduction. Based on the analysis of capital structure as conceived from Basel I to Basel III approaches of regulation to this important indicator are discussed. Instability sources and indicative instruments of macroprudential policy are analysed on an example of the excessive growth of credits and leverage as an instability source and countercyclical capital buffer, sectoral capital requirements and leverage ratio in the role of indicative instruments.
Highlights
Prudential policy rules as a set of regulatory requirements have been applied to credit institutions and investment companies in the long run
The creation of new supervisory architecture of the Economic Area (EEA) financial system was initiated by the de Larosière report (2009), that identified the causes of financial crisis and proposed to create the uniform set of rules on a European level that would strengthen the EEA financial system
These are European Banking Authority (EBA), whose activity is aimed at the area of microprudential policy and European Systemic Risk Board (ESRB), whose activities correspond with macroprudential policy and with the concern for financial stability
Summary
Prudential policy rules as a set of regulatory requirements have been applied to credit institutions and investment companies in the long run. The concepts macroprudential and/or microprudential supervision, rules, policy are reflected in the institutional structure of regulation and supervision of the financial sector. In documents dealing with the present approach to the financial market supervision and with the rules of the activity of financial institutions it is not always specified explicitly whether it is regulation or supervision These concepts are combined, confounded or used as alternatives. The objective of the present article is to analyse the relationship between macroprudential policy and microprudential policy and their impact on the new architecture of institutional structure of regulation and supervision in the EEA. For the final functional form necessary reporting from the level of domestic supervisory structures should be available This requirement is difficult to meet because it is important to note that no uniform domestic arrangement of regulation and supervision exists in the EU member countries
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