Abstract
<div class="page" title="Page 1"><div class="layoutArea"><div class="column"><p><span>The economics literature related to the financial system seeks to define the concepts of financial stability, systemic risk and macroprudential instruments for the purpose of drafting a policy that essentially "leans against the wind", that is, a policy that monitors macroeconomic vulnerabilities and combats system instability. Such a policy should cover all financial institutions involved in credit intermediation (not just banks) and consider the pro-cyclical and intrinsic nature of risk in the financial system, and account for the spillovers effects of policies in other countries, that is, the global context. This article summarizes the main concepts related to macroprudential policy discussed in the economics literature after the crisis the 2008 financial crisis. In addition, we describe macroprudential policy in the context of the Brazilian financial system, specifically major policies implemented in the banking regulatory environment related to Basel III and non-bank regulations related to shadow banks. After the 2008 crisis, Brazil was one of the precursors countries in operating macroprudential instruments to curb excessive credit growth and strong capital inflows. The Brazilian financial system has a broad regulatory perimeter, adhering to international standards and covering the Shadow banking system. This system has a weak connection with the banking system and is small relative to the financial assets of the national and global systems. </span></p></div></div></div>
Highlights
The economics literature and the practices of central banks have been under discussion in order to rethink macroeconomic policy in light of a prudential approach
Given the causes and effects of the international financial crisis of 2008, it was noticed that a single monetary policy instrument, originating from the inflation targets adopted by most central banks, is unable to ensure the stability of the entire financial system
In the cross-sectional dimension, the measures include the size and concentration of financial institutions as a percentage of the market or GDP; verification of joint exposure in the balance sheets of financial institutions, such as capital and liquidity positions; default probability measures of a group of financial institutions based on dependency indicators such as stock prices and credit default swaps (CDS); and contingency claims analysis (CCA), a measure of the risk-adjusted balance sheets of financial institutions that quantifies the contribution of a specific institution to systemic risk
Summary
The economics literature and the practices of central banks have been under discussion in order to rethink macroeconomic policy in light of a prudential approach. The present article summarizes the context of and debate in the economic literature regarding macroprudential policy. The aim is to show the main mainstream definitions of prudential policy in the context of macroeconomic management, including attempting to provide strict definitions of systemic risk, financial stability, and macroprudential instruments. This article aims to analyze macroprudential policy in the Brazilian context and outlines the main policies implemented, the banking regulations associated with Basel III and non-bank regulations related to shadow banks. The second section summarizes the main concepts, objectives and instruments of macroprudential policy and provides some important considerations related with mainstream discussion and appoints their relation with Minsky’s theory. The second subsection describes the implementation of Basel III in the Brazilian scene, and the shadow banking system.
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
