Abstract
Abstract Six years after the outbreak of the financial crisis that had shaken the global financial system, experts and analysts all over the world continue discussing the effectiveness, scope and adequacy of mechanisms and measures implemented in the meantime, as well as the adequacy of the underlying theoretical concept. A global consent has been reached on ensuring financial stability through the interaction of monetary, fiscal and prudential policy to ensure the necessary macroprudential dimension of regulatory and supervisory frameworks. The USA crisis spilled over to Europe. Strong support of governments to bail out banks quickly resulted in sovereign debt crises in some peripheral EU Member States. Fiscal insolvency of these countries strongly shook the EU and increased doubts in the monetary union survival. The European Union stood united to defend the euro and responded strongly with a new complex and comprehensive financial stability framework. This supranational framework is a counterpart to the global financial stability framework created by the G20 member countries. Starting from the specific features of the monetary policy whose capacities are determined by euroisation, available instruments and resources for preventive supervisory activities, as well as the role of the government in crisis management, Montenegro created a framework for maintaining financial stability and prescribed fostering and maintaining financial stability as the main objective of the Central Bank of Montenegro.
Highlights
The 2007/8 global financial crisis has forever changed the relationship between macroeconomic and prudential policies
As a very complex response to the consequences of the global financial crisis that later manifested as the sovereign debt crisis and the economic crisis, the EU created a new financial stability framework which rests on the European System of Financial Supervisors (ESFS), which includes the European Systemic Risk Board (ESRB), and three new European Supervisory Authorities (ESAs) at microprudential level, including: the European Banking Agency (EBA), European Securities and Markets Authority (ESMA), and the European Insurance and Occupational Pension Authority (EIOPA)
Financial stability is a public good, of national but of global importance as well. This perception has encouraged the international professional and financial public to examine all consequences of the global financial crisis and reaffirmed their position to act uniformly in creating a new institutional and regulatory framework for maintaining financial stability
Summary
The 2007/8 global financial crisis has forever changed the relationship between macroeconomic and prudential policies. The crisis managed to unify different economic and financial groups, regions and countries from different continents, raising the level of global awareness on the necessity of establishing a new financial stability architecture in order to, as far as reasonably possible, cover the global network of financial flows and define universal standards of conduct for all participants tailored to their size and corresponding level of taken risk This is why Basel III is important here since it aims to convert this risk into additional required capital and liquid assets in order to achieve desirable levels from the supervisory point of view which is well reflected in the term “adequacy”. We single out the following: development of the financial stability framework at the global and national levels; redefining of the roles of the World Bank and the International Monetary Fund, upgrade of regulatory framework of capital adequacy and banks’ liquidity in order to eliminate procyclicality under Basel II; redefining international accounting standards; stronger regulation of rating agencies and the like
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