Macroprudential warnings in the Euro zone and Hungary

Abstract

During the present financial crisis, the focus of the regulation and supervision of financial institutions has shifted from being institution-based (microprudential) towards the systemic level (macroprudential). A special element of the macroprudential regulatory and supervisory toolkit is the issue of macroprudential warnings. Prior to the crisis, both the international and the domestic authorities issued warnings concerning the emergence of system-wide risks in the financial sector. However, these warnings did not result in significant changes in the behaviour of the banks, which were the main addressees of the warnings. The article analyses the practice and effectiveness of macroprudential warnings in relation to the European Central Bank and the competent Hungarian authorities. The subject matter is particularly topical, taking into account that one of the very first steps in changing the institutional framework of financial supervision, as a response to the financial crisis, has been the establishment of an institutional framework for issuing macroprudential warnings.