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2018 | OriginalPaper | Chapter

4. Policy Interactions and Conflicts

Author : Luca Amorello

Published in: Macroprudential Banking Supervision & Monetary Policy

Publisher: Springer International Publishing

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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.

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previous chapter A Legal Approach to Monetary Policy

next chapter The Legal Interaction in the EU Institutional Framework

Listokin (2014), p. 2.

Idem, p. 2.

In particular, some authors claim that excessively easy monetary policy by the Federal Reserve in the first half of the decade helped causing the global house price bubble. This opinion is shared, among others, by White (2009), pp. 115–124; Taylor (2009), pp. 1–30; Ahrend, Cournède, and Price (2008), pp. 5–33. Other authors claim that the role of monetary policy in financial bubble should not be overestimated, and other factors, such as mortgage standards, were far more important in the build-up of the crisis. Of this view, in particular, see Dokko, Doyle, Kiley, Kim, Sherlund, Sim, and Van Den Heuvel (2011), pp. 239–283; Bernanke (2010).

For example, see Committee on International Economic Policy and Reform (2011), pp. 1–35. The Committee, composed of Barry Eichengreen, Mohamed El-Erian, Arminio Fraga, Takatoshi Ito, Jean Pisani-Ferry, Eswar Prasad, Raghuram Rajan, Maria Ramos, Carmen Reinhart, Helene Rey, Dani Rodrik, Kenneth Rogoff, Hyun Song Shin, Andres Velasco, Beatrice Weder di Mauro, and Yongding Yu, suggests that financial stability should be an explicit objective of central banks.

See Agur and Demertzis (2012), p. 4.

On the issue, inter alia, see Aiyar, Calomiris, and Wieladek (2014), pp. 1–42.

For a survey of the relevant literature, see Angelini, Nicoletti-Altimari, and Visco (2012).

In general, see Tröger (2015), p. 577.

With regard to monetary policy, the simplest DGSE model is constructed around the interconnections of three blocks: (1) an aggregate demand block, (2) an aggregate supply block, and (3) a monetary policy equation. The equations that define these blocks are derived from so-called micro-foundations, that is, explicit assumptions about the behavior of the economic actors—namely, households, firms, the government, and a central bank—which are supposed to interact in a simplified economy. For further details, see Sbordone, Tambalotti, Rao, and Walsh (2010), pp. 24–25.

Sbordone, Tambalotti, Rao, and Walsh (2010), p. 24.

In particular, the ECB uses mainly two aggregate DSGE models for its policy analysis: (1) the New Area Wide Model (NAWM) and (2) the Christiano, Motto, and Rostagno (CMR) model. For details, see Smets, Christoffel, Coenen, Motto, and Rostagno (2010), pp. 51–65.

Smets and Wouters (2004), pp. 842–843, claim that DSGE models with sticky prices and wages are sufficiently rich to capture most of the statistical features of the main macroeconomic time series. While the model structure is of much help to capture the parameters and the type of shocks that may affect the economy, its probabilistic nature implies that these models can be easily used to forecast uncertainly and to perform a model and data-consistent analysis.

Angelini, Nicoletti-Altimari, and Visco (2012), pp. 9–10.

See Kannan, Rabanal, and Scott (2009).

Idem, pp. 20–21.

See N’Diaye (2009).

Idem, p. 21.

Angeloni and Faia (2013), pp. 311–324.

Idem, p. 324.

Idem, p. 312. Additional support to this stabilizing role is given by Suh (2012).

See Roger and Vlček (2011).

Idem, p. 20.

See Beau, Clerc, and Mojon (2012).

See Agur and Demertzis (2012).

Lambertini, Mendicino, and Punzi (2013), pp. 1500–1522.

See Maddaloni and Peydrò (2013), pp. 121–169.

Idem, pp. 157–162.

Antipa and Matheron (2014), pp. 225–239.

See Cesa-Bianchi and Rebucci (2015).

Levine and Lima (2015), pp. 1–36.

See Angelini, Neri, and Panetta (2011).

Idem, p. 21.

Idem, p. 24.

See De Paoli and Paustian (2013).

See Idem, p. 3. See also Rogoff (1985), pp. 1169–1189.

De Paoli and Paustian (2013), p. 33.

See Gelain and Ilbas (2014).

According to the authors, this is the case because the macroprudential authority would be more effective on fulfilling its objectives and safeguarding financial stability.

For example, see Beau, Clerc, and Mojon (2012), p. 7.

See Shin (2015).

IMF (2013a), p. 9.

Idem, p. 9.

Gameiro, Soares, and Sousa (2011), p. 15.

Idem, p. 15.

Idem, p. 16.

Mishkin (1996), pp. 5–6.

Claessens, Ghosh, and Roxana (2014), p. 14.

Yeşin (2013), p. 220.

Idem, p. 222. For more insights on the relationship between systemic risk and monetary policy through the exchange rate channel, see Dell’Ariccia, Laeven, and Marquez (2011). See also Brzoza-Brzezina, Kolasa, and Makarski (2015).

Yesin (2013), p. 220. See also Antipa and Matheron (2014).

See Yellen (2010).

See Goodhart, Tsomocos, and Vardoulakis (2009), paras 2.1.1. and 2.1.2.

Idem.

Gameiro, Soares, and Sousa (2011), p. 15.

Idem, p. 15.

CGFS (2012), p. 60.

IMF (2013a), p. 10.

Idem, p. 10.

CGFS (2012), p. 60.

Idem, p. 60.

For details, see supra at notes 607–622.

See Yellen (2010).

See supra at note 614.

Dubecq, Mojon, and Ragot (2009), p. 4.

Idem, p. 4.

Idem, p. 5.

Jiménez, Ongena, Peydró, and Saurina (2008), p. 31. This opinion is shared by Maddaloni and Peydró (2010) who analyze the lending standards of US and the Euro area in periods of low interest rates.

Idem, p. 31. Similarly, Altunbas, Gambacorta, and Marques-Ibanez (2010) found that unusually low interest rates over an extended period of time contribute to a sharper rise in expected default probabilities for banks, consistent with an increase of risk-taking levels.

Adrian and Liang (2014), p. 3.

See supra at note 616.

Gambacorta (2009), p. 44. See also Borio and Zhu (2008), pp. 5–6.

Idem, p. 45.

See Borio and Zhu (2008), pp. 9–13.

Idem, p. 14.

BCBS (2012), p. 14.

BCBS (2012), p. 14. See also Altunbas, Gambacorta, and Marques-Ibanez (2010), p. 9.

Agur and Demertzis (2012), p. 23.

See Giese, Nelson, Tanaka, and Tarashev (2013), p. 15.

Carboni, Pariès, and Kok (2013), p. 101.

See Meeks (2015), pp. 1–31, where the author argues that an increase in the required capital ratio has persistent and negative effects on household and corporate lending growth. This reduction in lending growth negatively influences GDP growth, with corporate bond and mortgage spreads acting to amplify this negative pressure through a financial accelerator channel. Conversely, Karmakar (2013), pp. 1–34, shows that countercyclical capital buffers can make the economy resilient to downturns and, in terms of consumption and welfare, the society is better off under such regulatory regime than the current set of microprudential policies.

Carboni, Pariès, and Kok (2013), p. 101. With respect to the equity levels, Francis and Osborne (2012), pp. 803–816, found that regulatory capital requirements play a substantial role in determining banks’ internal target capital ratios, and their results demonstrate that desired capital ratios increase (decrease) as capital requirements increase (decrease). Instead, Bridges, Gregory, Nielsen, Pezzini, Radia, and Amar Spaltro (2014), pp. 3–23, investigate by using a panel regression the effects of a change in bank capital requirements on lending decisions. The authors argue that a tightening of capital requirements may affect lending decisions with heterogeneous responses in different sectors of the economy.

Meeks (2015), p. 3.

For details, see Kawata, Kurachi, Nakamura, and Teranishi (2013). In addition, Carboni, Pariès, and Kok (2013), at p. 103, argue that changes to banks’ capital and liquidity positions, along with their influence on lending decisions, are likely to have considerable costs for the real economy. But these costs are likely to be offset by the long-term benefits that a macroprudential policy intervention may generate as it reduces the probability of a future crisis.

Carboni, Pariès, and Kok (2013), p. 103.

Idem, p. 103.

Borio and Zhu (2008), p. 17.

Idem, p. 7.

Inter alia, see Angeloni and Faia (2013), pp. 311–324; Havemann (2014).

Angeloni and Faia (2013), at p. 312.

ESRB (2014a), p. 33.

Olsen (2013), p. 5.

See De Carvalho and De Castro (2015), pp. 3–31, who found that macroprudential policy announcements have an impact on the gap between inflation expectations and the inflation target. In this respect, Wadhvani (2014), p. 442, argues that an increase of time-varying capital instruments will operate primarily through the spreads between the lending rate and the central bank’s policy rate. Due to this, such an increase could have a costly impact on inflation expectations.

Olsen (2013), p. 5.

Idem, p. 5.

100

Idem, p. 5.

101

For example, see Antipa and Matheron (2014), p. 227, arguing that time-varying capital buffers can increase the resilience of the banking system and contribute to the proper transmission of monetary policy. This is because the buffers can help maintain the provision of credit to the economy and reduce the depth of the downturn, thereby reducing the need for central banks to offset the effects of tighter credit conditions on output; Agenor, Alper, and Da Silva (2012), pp. 193–223, who show that combining central bank’s interest rate policy and a countercyclical capital requirement may be optimal for promoting overall economic stability. See also N’Diaye (2009), where the author explains that the introduction of a countercyclical capital buffer for banks can allow monetary authorities to achieve the same output and inflation objectives but with smaller adjustments in interest rates.

102

Antipa and Matheron (2014), p. 227.

103

See Antipa and Matheron (2014), p. 227.

104

IMF (2013a), p. 12. On this topic, in particular, see also Angelini, Neri, and Panetta (2011).

105

For a general overview of the potential conflicts, see Caruana (2011).

106

See Bindseil and Lamoot (2011), p. 35.

107

ESRB (2014a), p. 111.

108

Idem, p. 111.

109

See Bech and Keister (2013), pp. 49–60.

110

Idem, p. 2.

111

Idem, p. 2.

112

Bech and Keister (2013), p. 3. The same argument is developed in ECB (2013), pp. 73–89, and Schmitz (2013), pp. 138–148, where the authors investigate the effect of the LCR introduced by Basel III for the monetary policy in the Euro area. According to Schmitz (2013), in particular, the LCR disincentivizes banks to lend and/or borrow on the unsecured money market. Therefore, more banks will participate in the open market operations of central banks. Similar concerns are expressed in Bindseil and Lamoot (2011), pp. 1–41.

113

For an empirical analysis, see Bonner and Eijffinger (2012a).

114

See Bonner and Eijffinger (2012b).

115

Scalia, Longoni, and Rosolin (2013), p. 5.

116

Idem, p. 12.

117

Idem, p. 12. For a detailed overview upon the effects of the NSFR on the secured and unsecured money markets, see CGFS (2015), pp. 13–14.

118

For details, see Giordana and Schumacher (2013), pp. 649–652.

119

Idem, p. 652.

120

In particular, Bech and Keister (2013), p. 3, state that relevant factors influencing this interaction are (1) the liquidity surplus/deficit of the banking system, (2) the specific variables used to calculate the LCR requirement, (3) the term of the transaction, and (4) the counterparties involved. In ECB (2013), p. 80, it is argued that these factors include (1) the initial level of the LCR, (2) the nature of the collateral that is mobilized, (3) haircuts applied in the market, and (4) the extent to which some LCR constraints are binding.

121

ESRB (2014a), p. 111.

122

Idem, p. 111. For further details, see also Rochet (2008), p. 49.

123

ESRB (2014a), p. 56.

124

For a survey of UK mortgage market, see Bunn, Drapper, Rowe, and Shah (2015), pp. 358–361, where the authors found that the average mortgage debt of a British householder has risen to about £85,000 in 2015. Empirical proofs of mortgage debt relevance for the Netherlands can be found in the research paper of ABN-AMRO: Mortgage market in the Netherlands, May 2012, reporting that ‘The Netherlands scores high in terms of mortgage debt. In fact, with a mortgage debt stock equalling 108% of gross domestic product, the Netherlands ranks number one in the European Union’. Additional analysis is provided in De Nederlandsche Bank (2015), pp. 7–53. Similarly, in Sweden, household debt in the form of mortgages remains at very high levels—roughly 160% of disposable income on average in 2013—and is expanding, with net credit flows outpacing nominal GDP growth. For analytical surveys of the mortgage market in Sweden, see European Commission, Country Report Sweden 2015, Including an In-Depth Review on the prevention and correction of macroeconomic imbalances, SWD (2015) 46 final, Brussels, 26 February 2015; Finansinspektionen, The Swedish Mortgage Market, 14 April 2016.

125

Gerlach (2012), p. 1.

126

Idem, p. 1.

127

For an empirical investigation of how these monetary policy-induced fluctuations in house prices affect private consumption and, thus, consumer prices and economic growth, with particular respect to EU countries, see Giuliodori (2005), pp. 519–543. The author found that house prices are significantly affected by changes in the policy interest rates and that residential asset values amplify these effects on consumptions in those countries where housing and mortgage markets are more developed. Similar investigations are conducted by Mishkin (2007), pp. 1–45; Ahearne, Ammer, Doyle, Kole, and Martin (2005), pp. 1–42, Assenmacher-Wesche and Gerlach (2008), pp. 1–33.

128

Antipa and Matheron (2014), p. 227.

IMF (2008), p. 22.

Idem, p. 22.

Idem, p. 23.

See Idem, p. 23.

IMF (2013a), p. 13.

For details, see Geanakoplos (2010), pp. 111–112. See also Demyanyk and Hemert (2011), pp. 1848–1880.

135

IMF (2013a), p. 13.

136

See Geanakoplos (2010), p. 113.

IMF (2013a), p. 13.

Idem, p. 13.

Idem, p. 14.

See IMF (2008), p. 23.

141

IMF (2013a), p. 14.

142

For example, see Caruana (2011). In general, see also Borio and Shim (2007).

143

Barwell (2013), p. 69.

144

For example, see N’Diaye (2009).

145

Inter alia, see Ozkan and Unsal (2014).

146

See Mundell (1962), pp. 70–79.

147

See Reinert and Rajan (eds.) (2009), p. 85.

148

Idem, p. 86.

149

Beau, Clerc, and Mojon (2012), p. 3.

150

See Bruno, Shim, and Shin (2015), p. 3.

151

For details, see Antipa and Matheron (2014), pp. 225–239.

152

Deutsche Bundesbank (2015), p. 40.

153

For a survey on the economic literature claiming this complementarity, see supra at notes 891–915. Of this opinion, see also Carboni, Pariès, and Kok (2013), p. 107.

154

See Bruno, Shim, and Shin (2015).

155

Carboni, Pariès, and Kok (2013), p. 107. On the issue at hand, see also Ghilardi and Peiris (2014).

156

For details, see Igan and Kang (2011).

157

Carboni, Pariès, and Kok (2013), p. 107.

158

Idem, p. 107.

159

See Idem, p. 107.

160

See OECD (2011), p. 74. See also Beau, Clerc, and Mojon (2012) and Unsal (2013). In addition cf. again: Ghilardi and Peiris (2014).

161

OECD (2011), p. 74.

162

For better insights on the issue, inter alia, see Angeloni and Faia (2009); Agur and Demertzis (2012); Angelini, Neri, and Panetta (2011).

163

IMF (2012), p. 10. For an empirical survey, cf. Wong, Fong, Li, and Choi (2011). For a similar assessment, see Crowe, Dell’Ariccia, Igan, and Rabanal (2011).

164

IMF (2012), p. 10. For further details, see also Leduc and Natal (2015).

165

Tröger (2015), pp. 577–578.

166

IMF (2013a), p. 13.

167

Idem, p. 13.

168

Among others, see Caruana (2011).

169

Barwell (2013), p. 69.

Idem, p. 69.

Idem, p. 69.

Idem, p. 69.

Volz (2015), p. 163.

Rubioa and Carrasco-Gallego (2014), pp. 326–327.

175

See Beau, Clerc, and Mojon (2012), p. 8.

176

IMF (2012), p. 6.

177

Beau, Clerc, and Mojon (2012), p. 8.

178

Idem, p. 8.

179

Beau, Clerc, and Mojon (2012), p. 8.

180

Inter alia, see Holt (2009), pp. 120–129.

181

For an empirical estimate of such a potential conflict, see, for example, Frait, Malovaná, and Tomšík (2015), pp. 110–120.

182

See IMF (2012), pp. 10–11.

183

See Spencer (2014).

184

For example, see Angelini, Nicoletti-Altimari, and Visco (2012).

185

ESRB (2015), p. 7. The report provides also a general survey of the stage of implementation of macroprudential instruments in the EU Member States.

186

A countercyclical capital buffer rate of 0% currently applies in all EU countries.

187

IMF (2013b), p. 17.

188

For example, see Mersch (2013); Lautenschläger (2014).

189

Inter alia, see Angelini, Neri, and Panetta (2011), p. 22. See also Rubio and Carrasco-Gallago (2014), pp. 326–336; De Paoli and Paustian (2013), pp. 1–32.

190

See Angelini, Neri, and Panetta (2011), p. 22.

191

Kim (2013), p. 4.

192

Idem, p. 4.

193

For a quantitative estimate of this variance, see De Paoli and Paustian (2013), pp. 17–31, who compare different ways in which the monetary and macroprudential authority may cooperate.

194

For a general overview of these institutional models, see Nier, Osiński, Jácome, and Madrid (2011a). For an empirical analysis of such models, see also Nier, Osiński, Jácome, and Madrid (2011b). More precisely, the authors categorize the institutional models on the basis of the following criteria: (1) degree of institutional integration of central bank and financial regulatory functions; (2) ownership of macroprudential policy; (3) role of the treasury; (4) institutional separation of policy decisions from control over policy instruments; (5) existence of a separate body coordinating across policies to address systemic risk. See also Lastra (2015), pp. 325–328.

195

Alamsyah (2015), p. 5.

196

See Reifschneider and Williams (2000), pp. 936–966; Cecchetti, Genberg, Lipsky, and Wadhwani (2000), pp. 70–78; Castro (2011), pp. 228–246; Carré, Couppey-Soubeyran, and Dehmej (2015), pp. 541–572. This rule can be expressed by the following simple formula: i = r +π + απ (π − πc) + αy (y − y*) + αs (f − f*), where the nominal interest rate of the central bank (i) is equal to the gap between inflation (π) and inflation target (πc), the difference between production (y) and its potential (y*), and the difference between a financial stability proxy (f) and a measure of the optimal/historical level of this financial stability proxy (f*), containing information from some asset prices and financial variables. For a description, see also Canuto and Cavallari (2013), p. 3. For a quantitative assessment of the impact of adding asset prices to the standard Taylor rule, see also Siklos, Werner, and Bohl (2004). For a literature review on the augmented Taylor rule, see Käfer (2014), pp. 159–192.

197

Agénor and Pereira da Silva (2012), p. 207.

198

Visco (2012), p. 131.

199

For a survey of this monetary policy approach, see Agur and Demertzis (2012), pp. 3–14; Gambacorta and Signoretti (2014), pp. 146–174.

200

An empirical justification for such a proposal is provided in Cecchetti, Genberg, Lipsky, and Wadhwani (2000), pp. 72–73. An example of the adoption of such model is offered by the pre-2014 experience of Sweden. At that time, Sweden had no institutional framework for macroprudential policy. In order to reduce pressure on upward inflation, along with house prices and household debt, which were considered too high, the Swedish central bank had to rely exclusively on its monetary policy instruments and therefore raised its policy rate from 0.25% in June 2010 to 2% in July 2011. For details, see the Minutes of the Riksbank’s Executive Board’s Monetary Policy Meeting of 14 December 2010, available at http://www.riksbank.se/en/Press-and-published/Minutes-of-the-Executive-Boards-monetary-policy-meetings/2010/Minutes-of-the-Executive-Boards-monetary-policy-meeting-on-14December2004/.

201

The analytical results on the effects of the augmented Taylor rule in fact do not provide a sufficient justification for its introduction. For example, Kafer (2014), pp. 174–182, explains that there would have been little or no benefit for the ECB in using the augmented Taylor rule as developments across Euro area countries have been too heterogeneous. For the author, house price booms are primarily a national phenomenon; therefore a common monetary policy with an augmented Taylor rule would not have been well suited for the Eurozone to combat excessive credit growth.

202

See Trichet (2005), pp. 16–17.

203

Trichet (2005), p. 17.

204

See Bernanke and Gertler (1999), pp. 17–44. In particular, some empirical studies found the leaning against the wind monetary policy too simplistic. For example, Laseen, Pescatori, and Turunen (2015), pp. 1–24, argue that such a policy approach may work only if the entire financial sector is procyclical. However, they found that procyclicality varies across countries and sectors over time. In addition, even in those cases where leverage is procyclical, an increase in the policy interest rates may exacerbate the initial asset price movements. Leaning against the wind without clearly distinguishing why leverage is increasing could lead to policy mistakes that may exacerbate financial stress and trigger a financial crisis.

205

Inter alia, see Nier, Osiński, Jácome, and Madrid (2011a), p. 9; Brockmeijer (2012), p. 166; Goodhart (2014), p. 14.

206

Nier, Osiński, Jácome, and Madrid (2011a), p. 10.

207

Idem, p. 10.

208

Idem, p. 10. As argued by Brockmeijer (2012), p. 166, the central bank’s management can easily put in place arrangements and incentives to ensure access to relevant data and collaboration between functions that would be difficult if more institutions were involved.

209

Nier, Osiński, Jácome, and Madrid (2011a), p. 10; Brockmeijer (2012), p. 166. As a corollary of this, ESRB (2014b), p. 15, states that an optimal coordination and balance of monetary and macroprudential policies can be easier if powers lie within the central bank. Against this backdrop, indeed, monetary policy must take account of the financial conditions which affect how monetary impulses are transmitted to the real economy. By the same token, macroprudential policy can respond to monetary policy effectively, since financial risks can arise when monetary policy targets inflation, particularly in an environment of low interest rates.

210

Nier, Osiński, Jácome, and Madrid (2011a), p. 10.

211

Brockmejer (2012), p. 168.

212

Idem, p. 168.

213

For a detailed analysis on the risks to credibility resulting from such an institutional model, see Deutsche Bundesbank (2015), pp. 68–69.

214

Nier, Osiński, Jácome, and Madrid (2011a), p. 11.

215

Idem, p. 10.

216

For example, see Agur and Sharma (2013), p. 20.

217

For more details, see Benes, Kumhof, Laxton, Muir, and Mursula (2013).

218

Nier, Osiński, Jácome, and Madrid (2011a), p. 11.

219

Mishkin (1999), p. 32.

220

Kaltenthaler, Anderson, and Miller (2010), p. 1267, where the authors claim that citizens will trust institutions and view them as legitimate if the institutions allow them to help set priorities for policy and those citizens have some ability to sanction policymakers if they refuse to heed citizen’s preferences for policy.

221

Alexander (2014), p. 544. For a discussion of the implication of this democratic challenge with respect to the EU architecture, see Ruser (2015), pp. 83–92; Habermas (2013), pp. 4–13; Majone (1998), pp. 5–28; Follesdal and Hix (2006), pp. 533–563.

222

Article 12 of the Statute of the National Bank of Belgium, as lastly amended by the Council of Regency of 14 January 2015 and approved by Royal Decree of 10 March 2015.

223

Article 23 of the Statute of the National Bank of Belgium.

224

This amendment was introduced by a decision of the General Meeting of 24 April 2012, which was ratified by Article 165(7) of Law 4009/2012 (government Gazette A 250/20 December 2012).

225

Ueda and Valencia (2014), p. 327.

226

Kydland and Prescott (1977), pp. 472–492. For more details on the time-inconsistency problem of central banks, see also Calvo (1978), pp. 1411–1428; Barro and Gordon (1983), pp. 589–610.

227

Ueda and Valencia (2014), p. 330.

228

An explanatory example is given in Deutsche Bundesbank (2015), at p. 68: ‘If monetary policy is responsible for both price stability and financial stability and if the latter is influenced by private-sector debt, for instance, it may initially be desirable for monetary policy to pursue a low inflation rate. However, following the onset of a financial shock, which gives rise to a high level of private-sector debt, for example, monetary policymakers could, under certain conditions, decide to reduce the real debt burden further down the line by allowing a higher rate of inflation.’

229

IMF (2012), p. 20.

230

For details, see Nier, Osiński, Jácome, and Madrid (2011a), p. 11. For an overview, see also Nier and Tressel (2011), p. 39.

231

Nier, Osiński, Jácome, and Madrid (2011a), p. 13.

232

Idem, p. 14.

233

This also holds true with respect to the coordination of macroprudential and microprudential policies. For better insights on this topic, see Osiński, Seal, and Hoogduin (2013), p. 4.

234

Nier, Osiński, Jácome, and Madrid (2011a), p. 14.

235

Idem, p. 14.

236

Idem, p. 11.

237

Idem, p. 13. See also Nier (2011), p. 201.

238

Idem, p. 14. In addition, cf. IMF (2013a), p. 19.

239

With respect to the mechanisms that can be used to compensate for such a separation, see Nier, Osiński, Jácome, and Madrid (2011a), pp. 31–32.

240

Among others, see Nier, Osiński, Jácome, and Madrid (2011b), at p. 22.

241

Nier (2011), p. 201.

242

For more details on the issue, see Chwieroth and Danielsson (2013).

243

Section 9B(1) of the Financial Services Act 2012. As stated in this Article, the FPC comprises the Governor of the Bank, the Deputy Governors of the Bank, the Chief Executive of the FCA, one member appointed by the Governor of the Bank after consultation with the Chancellor of the Exchequer, four members appointed by the Chancellor of the Exchequer, and a representative of the Treasury.

244

Section 9C of the Financial Services Act 2012.

245

Section 9L of the Financial Services Act 2012. However, a macroprudential measure can be disposed without being scrutinized and approved by the Parliament if the measure contains a statement that the Treasury are of the opinion that, by reason of urgency, it is necessary to adopt the measure without such procedure.

246

Section 9E of the Financial Services Act 2012. In this regard, the FPC is obliged to respond to any recommendation made by the Treasury, stating the action that the Committee has taken or is committed to take in accordance with the recommendation. If the Committee does not intend to act, it must state clearly the reasons of the inaction.

247

Nier, Osiński, Jácome, and Madrid (2011a), p. 15.

248

Ashley (2014), p. 16.

Idem, p. 16.

Idem, p. 16.

Rhu (2011), p. 122.

Nier, Osiński, Jácome, and Madrid (2011b), p. 26.

253

Idem, p. 26.

254

See IMF (2011).

255

For details, see Nier, Osiński, Jácome, and Madrid (2011b), p. 26. Impediments to data sharing are widely recognized by central banks and supervisory authorities and have been material in a number of countries, including the United States and the EU. For details on this topic, see Irving Fisher Committee on Central Bank Statistics (2015), pp. 7–10, which provides an in-depth analysis of the legal and market obstacles to information flows existing across relevant countries. For additional details, see also Tor and Aviram (2004), pp. 231–279.

256

Nier, Osiński, Jácome, and Madrid (2011b), p. 27.

257

An in-depth analysis on the democratic legitimacy of an independent macroprudential authority is provided by Tucker (2016), pp. 94–96.

258

Nier, Osiński, Jácome, and Madrid (2011b), p. 27.

259

Idem, p. 27.

260

Idem, p. 27.

261

For details, see Nier (2009), p. 14; Carney (2014).

262

See Nier, Osiński, Jácome, and Madrid (2011b), p. 16. For examples related to the operationalization of such a cooperative framework in Indonesia, Hong Kong, Malaysia, and Australia, see Lim, Ramchand, Wang, Wu (2013), pp. 8–11.

263

See Gesetz zur Überwachung der Finanzstabilität (Finanzstabilitätsgesetz) of 28 November 2012 (Federal Law Gazette I, page 2369) as last amended by Article 2 paragraph 36 of the Act of 1 April 2015 (Federal Law Gazette I, p. 434).

264

In particular, Section 1 of the Finanzstabilitätsgesetz assigns the following competences to the Committee: (1) discussing the factors that are key to financial stability; (2) strengthening cooperation between the institutions represented on the Financial Stability Committee in the event of a financial crisis; (3) advising on the handling of warnings and recommendations issued by the ESRB; (4) reporting annually to the lower house of Parliament, the Bundestag; and (5) issuing warnings and recommendations. The lack of hard-law measures on macroprudential policy—which are instead delegated to the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)—can be seen as a safeguard as to ensure that decisions with large distributional effects on the society are not direct responsibility of the Committee.

265

See Section 1(3) of the Finanzstabilitätsgesetz. In addition, the Committee includes also three members of BaFin, which is the authority directly responsible for the application of the macroprudential measure in the German jurisdiction.

266

With respect to the transmission and exchange of information and data between the Committee and the German Central Bank, see Section 4(1) of the Finanzstabilitätsgesetz.

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Title: Policy Interactions and Conflicts
Author: Luca Amorello
Publisher: Springer International Publishing
Book: Macroprudential Banking Supervision & Monetary Policy
Print ISBN: 978-3-319-94155-4

Electronic ISBN: 978-3-319-94156-1

Copyright Year: 2018
DOI: https://doi.org/10.1007/978-3-319-94156-1_4

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