Many people are puzzled by this new term thrown by the central bank. Through this article, we hope to guide readers to explore the true meaning of this new word and its significance to the reform of domestic financial supervision.
The central bank said in today's notice that the MPA system not only maintained the continuity and stability of the macro-prudential policy framework, but also improved it in six aspects. To understand what a "macro-prudential evaluation system" is, we first need to understand what a "macro-prudential" supervision is.
Macro and micro prudential supervision
To understand macro-prudential supervision, we need to start with a corresponding word: micro-prudential supervision.
Micro-prudential supervision refers to aiming at the stability of a single financial institution and a single financial sector. Prudent supervision of each financial institution to prevent problems in this institution belongs to the category of micro-prudence.
Accordingly, macro-prudential supervision naturally means that the scope of supervision is not limited to a single institution or department, and the goal is to achieve the stability of the entire financial system and prevent the outbreak of systemic risks in the financial system.
After the financial crisis in 2008, international regulatory authorities generally realized that micro-prudential supervision ignored some fatal risks in the economic system, while macro-prudential supervision can effectively make up for the blind spots in supervision. Therefore, there is an international call for macro-prudential supervision.
Since then, major economies and international organizations have also begun to focus on strengthening financial supervision reform with macro-prudential supervision as the main content, and establishing a macro-prudential supervision framework has become the consensus of the international community. In 2009, both the United States and the European Union announced that they would establish a macro-prudential supervision system and set up specialized institutions.
In April 2009, the G20 Summit announced the establishment of the Financial Stability Board (FSB), as an international macro-prudential regulatory organization for global financial stability, which will assess the vulnerability of different financial systems, promote coordination and information exchange among different regulatory agencies, provide guidance and support for large cross-border financial institutions with systemic importance (including China's four major banks), support emergency plans for cross-border crisis management, and jointly develop an early warning system for financial systems with the International Monetary Fund.
On June 29, 2009, the Bank for International Settlements issued its annual report, calling on countries and the international community to adopt the principle of macro-prudence to mitigate the negative impact of the pro-cyclical characteristics of the economic system.
On 20 10, Bank of China also announced the start of macro-prudential supervision. On 20 1 10, it began to establish a dynamic adjustment mechanism for differential reserves and a consensual loan management mechanism to prevent systemic financial risks. Until today, the central bank has taken further action to "improve the macro-prudential policy framework".
What does the macro-prudential policy framework include?
In its previous interpretation, People's Daily said that the macro-prudential policy framework includes adding countercyclical elements to policies, emphasizing more comprehensive supervision and solving problems such as "too big to fail":
The first is to adopt traditional policy tools and add "counter-cyclical" elements. Add countercyclical elements to monetary policy and fiscal policy, and emphasize the application of countercyclical means under the original capital supervision system. For example, when the economy is bad, we should expand fiscal expenditure and increase credit supply, and moderately relax regulatory standards, while when the economy is overheated, we should reduce credit supply and improve regulatory standards to prevent the accumulation of risks.
The second is to extend the traditional regulatory boundaries and emphasize "more comprehensive" supervision. The regulatory field extends to cross-industry, cross-market and cross-border, and shadow banking, which was not regulated before, is also included in the regulatory scope, emphasizing the consistency of various regulatory rules and realizing "full coverage" and "seamless docking" of supervision.
The third is to adopt new regulatory tools to solve the problems of "procyclicality" and "too big to fail". Increase new regulatory indicators such as leverage ratio and liquidity, put forward higher capital adequacy requirements for systemically important institutions, and establish recovery and disposal mechanisms to prevent the impact of financial institution bankruptcy on the macro-economy.
The article also said that it is necessary to raise the awareness of all sectors of society to guard against financial risks, give full play to the leading role of the central bank in maintaining the stability of the financial system, strengthen the coordination of monetary policy, fiscal policy and financial supervision policy, establish and improve the risk early warning mechanism and disposal mechanism, and keep the bottom line that systematic and regional financial risks do not occur.