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2018 | Book

Introduction Read chapter Read first chapter

Macroprudential Banking Supervision & Monetary Policy

Legal Interaction in the European Union

Author: Dr. Luca Amorello

Publisher: Springer International Publishing

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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About this book

The European experience suggests that the efforts made to achieve an efficient trade-off between monetary policy and prudential supervision ultimately failed. The severity of the global crisis have pushed central banks to explore innovative tools—within or beyond their statutory constraints—capable of restoring the smooth functioning of the financial cycle, including setting macroprudential policy instruments in the regulatory toolkit. But macroprudential and monetary policies, by sharing multiple transmission channels, may interact—and conflict—with each other. Such conflicts may represent not only an economic challenge in the pursuit of price and financial stability, but also a legal uncertainty characterizing the regulatory developments of the EU macroprudential and monetary frameworks. In analyzing the “legal interaction” between the two frameworks in the EU, this book seeks to provide evidence of the inconsistencies associated with the structural separation of macroprudential and monetary frameworks, shedding light upon the legal instruments that could reconcile any potential policy inconsistency.

Table of Contents

Frontmatter
Chapter 1. Introduction
Abstract
Macroprudential and monetary policies may interact—and conflict—with each other although pursuing different objectives. This statement entails that when national authorities decide to use one policy to effectively achieve its statutory target, the side effects affecting the other policy should be considered. This is not only an economic challenge in the pursuit of price and financial stability but also a legal uncertainty to be kept under severe scrutiny, especially for the Eurozone where the responsibility for conducting macroprudential policy is statutorily separate from the ECB’s monetary tasks. The legal inconsistencies associated with this structural separation raise a number of questions about the legal architecture of the EU macroprudential banking supervision and monetary policy.
Luca Amorello
Chapter 2. Law and Economics of Macroprudential Banking Supervision
Abstract
Amorello offers an overview of the key concepts of macroprudential policy through the analysis of its legal sub-components. Strategies, indicators, and tools along with the channels of systemic instability are summarized to outline the theoretical underpinnings of the macroprudential dimension. A legal inquiry deconstructing the economic concepts of macroprudential policy sheds some light on its blurred policy perimeter, allowing the reader to find one broad definition of macroprudential policy that may best reconcile its economic foundations with the corresponding regulatory instruments. In view of these premises, the EU macroprudential regulatory framework is preliminarily examined.
Luca Amorello
Chapter 3. A Legal Approach to Monetary Policy
Abstract
Amorello explores what is deemed for monetary policy, especially with regard to the main components of the EU monetary policy framework within their legal boundaries. The basic rationale is to provide instruments necessary to discuss the institutional construction of the Eurozone and highlight the existing interaction with the macroprudential supervisory framework. For this purpose, Amorello explores the contemporary economic developments in monetary policy, discussing the critical objectives and the main findings of contemporary central banking practice. A legal analysis of monetary policy then explores the economic interactions between law and monetary policy channels, considering also the major components of an effective monetary supervisory framework.
Luca Amorello
Chapter 4. Policy Interactions and Conflicts
Abstract
Amorello explores interactions and conflicts between macroprudential and monetary policies, providing an impact assessment of the current calibrations of powers and competences, as well as evidences of the economic interactions between financial and monetary stability. The risk of conflicting policy stances between macroprudential supervision and monetary intervention under particular scenarios is also recognized, paying attention to the risk of negative spillovers that may potentially arise in the EU financial environment. Amorello also scrutinizes the institutional models that may permit the alignment of the two policies, noting how the EU legal and institutional settings may offer a fruitful stimulus for reflection upon the critical issues at stake.
Luca Amorello
Chapter 5. The Legal Interaction in the EU Institutional Framework
Abstract
Amorello explores the intertwined legal architecture of monetary and macroprudential policies in the EU, with the aim to figure out whether, and to what extent, the cross side effects of the two policies are acknowledged in the relevant EU texts. The EU institutional architecture is particularly analyzed considering the legal arrangements set by the law to mitigate risks of policy conflicts. The lack of a European integrated framework of monetary and macroprudential policies can have negative implications for their cooperative conduct as well as for the operationalization of additional macroprudential instruments that may fully capture—and mitigate—the systemic risks arising due to the monetary policy stances of the ESCB.
Luca Amorello
Chapter 6. Some Concluding Remarks
Abstract
Understanding the main components of macroprudential and monetary policy under the realm of the law provides a speculative basis upon which lawyers may discuss the current interplay between the two policies. Lawyers can play a role in this architectural construction by decomposing macroeconomic concepts and reconstructing them under a legal perspective. The understanding of how aggregate phenomena are supposed to work can allow lawyers to propose a menu of policy and regulatory options that may likely mitigate negative spillovers and inconsistent interactions. Where these interactions are recognized, sound legal arrangements should be put in place as to ensure a coherent system of checks and balance in the conduct of monetary policy and macroprudential banking supervision.
Luca Amorello
Backmatter
Metadata
Title
Macroprudential Banking Supervision & Monetary Policy
Author
Dr. Luca Amorello
Copyright Year
2018
Electronic ISBN
978-3-319-94156-1
Print ISBN
978-3-319-94155-4
DOI
https://doi.org/10.1007/978-3-319-94156-1