Macroprudential Policy in Germany and the EU Políticas macroprudenciales en Alemania y la UE Robert Düll

Transcription

1 Macroprudential Policy in Germany and the EU Políticas macroprudenciales en Alemania y la UE Robert Düll The views expressed are my own and do not necessarily represent those of the Deutsche Bundesbank

2 Agenda 1) Policy Framework in Europe 2) Macroprudential Policy in Germany 3) Macroprudential Instruments 4) Research and Analytical Instruments 5) Conclusion Page 2

3 Macroprudential Policy in Germany and the EU 1) Policy Framework in Europe 2) Macroprudential Policy in Germany 3) Macroprudential Instruments 4) Research and analytical instruments 5) Conclusion Page 3

4 Policy Framework in Europe European System of Financial Supervision ESFS Microprudential supervision Macroprudential supervision The Joint Committee EBA EIOPA ESMA ESRB National supervisory authorities Page 4

5 Secretariat Policy Framework in Europe European Systemic Risk Board (ESRB) ESRB Steering Committee (SC) General Board (GB) Advisory Scientific Committee (ASC) Advisory Technical Committee (ATC) Part of ESFS Issues warnings & recommendations Addressees: EU, Member States, supervisors Comply or explain principle Page 5

6 Policy Framework in Europe Objectives of the ESRB Develop a European macro-prudential perspective; Enhance the effectiveness of early warning mechanisms; Improving the interaction between micro-and macroprudential analysis; Allow for risk assessments to be translated into action by the relevant authorities. Page 6

7 Policy Framework in Europe Objectives of the ESRB (2) ESRB can be seen as a lesson learned from the financial crisis: Consistency between macro- and micro-prudential supervision. EU pioneering role Basis for better early detection of systemic risks Page 7

8 Policy Framework in Europe Banking Union Basic justification for need for macroprudential policy does not change New EU framework for macroprudential policy must not be endangered o ESRB und national macroprudential autorities Anticyclical capital buffer o Must be set on a national level o Should be set by national authorities Adaptions on an institutional level might become necessary Page 8

9 Macroprudential Policy in Germany and the EU 1) Policy Framework in Europe 2) Macroprudential Policy in Germany 3) Macroprudential Instruments 4) Research and Analytical Instruments 5) Conclusion Page 9

10 Macroprudential Policy in Germany Institutional Set-up Deutsche Bundesbank Monetary Policy Financial Stability, including macroprudential surveillance Co-sharing of banking supervision (legal supervisor: BaFin) o continuous oversight of credit institutions Federal Financial Supervisory Authority (BaFin) Supervises banks and financial services providers, insurance sector and securities trading Subject to the legal and technical oversight of the Ministry of Finance Funded by fees and contributions from the institutions it supervises Page 10

11 Macroprudential Policy in Germany Financial Stability Act ESRB recommendation: National macroprudential authorities (Januar 2012) o Operationally independent o Control over appropriate instruments o Leading role for central banks Germany: Financial Stability Act (Finanzstabilitätsgesetz) o Legal basis, adoption expected this fall o Intended implementation date: 1 January 2013 o Establishment of Financial Stability Commission Page 11

12 Macroprudential Policy in Germany Financial Stability Commission Financial Stability Commission Established by draft law (Financial Stability Act) Macro-prudential authority Operationally independent 3 voting representatives each from Bundesbank, Ministry of Finance and BaFin o Representative of the Financial Market Stabilisation Agency (FMSA) in a non-voting capacity Quarterly meetings on a regular basis Page 12

13 Macroprudential Policy in Germany Financial Stability Commission (2) Decision making: o Resolutions require simple majority o No major decision will be taken against Bundesbank s position Instruments of the financial stability committee: o Warnings and o Recommendations ( comply or explain ) Page 13

14 Macroprudential Policy in Germany Financial Stability Commission: Tasks Warnings and recommendations: o Recipients are German public bodies o Recipients are bound by comply or explain o FSC follows up on implementation Advice on dealing with warnings and recommendations of the ESRB Annual report to the Bundestag Page 14

15 Macroprudential Policy in Germany Division of Tasks Tasks of the Bundesbank Macroprudential surveillance Proposes and drafts warnings and recommendations Drafts report to the Bundestag Tasks of BaFin Brings supervisory expertise and information to the Committee Control over legally binding instruments Provision of Information Enhanced exchange between Bundesbank and BaFin Bundesbank may obtain additional information from market participants Page 15

16 Macroprudential Policy in Germany The Mandate of the Bundesbank Challenges: Increase analytical capacity Need for further development of o methodologies o existing data sources and closing data gaps Further intensification of cooperation with BaFin and MoF Page 16

17 Macroprudential Policy in Germany and the EU 1) Policy Framework in Europe 2) Macroprudential Policy in Germany 3) Macroprudential Instruments 4) Research and Analytical Instruments 5) Conclusion Page 17

18 Macroprudential Instruments Toolbox Three types of macroprudential instruments: o Soft instruments: Communication (e.g. FSR) o Medium instruments: Warnings and recommendations o Hard (policy) instruments: instruments of intervetion (e.g. CCB) Instruments should cover the whole financial system: banks, insurance companies, markets Most important individual field of action: Banking regulation in EU Page 18

19 Macroprudential Instruments Communication: Financial Stability Report FSR aims at Informing stakeholders and general public, Highlighting possible risk scenarios Warning of concrete risks Published in November Main areas of 2011 report Sovereign debt a central risk factor International financial system between risk aversion and yield-seeking German financial system between heightened resilience and growing contagion risk Regulatory framework to contain systemic risk Page 19

20 Macroprudential Instruments Communication (2) BBk disseminates policy messages, analyses and research via Speeches Newspaper articles and interviews Bundesbank Discussion Papers Seriers Journal publications Conference presentations Organization of conferences (e.g fall conference: The banking sector and the state) Page 20

21 Macroprudential Instruments Policy Instruments: European Banking Regulation Basel III is implemented in the EU through a directive and a regulation (CRD IV/CRR) Instruments and measures provided for in the CRD IV/CRR: o Stricter prudential requirements for a limited period of time at the national level, inter alia : o Capital requirements, risk weights, disclosure requirements, liquidity requirements o Counter-cyclical capital buffer o Systemic risk buffer o Risk weights for real estate exposures (private and commercial) Page 21

22 Macroprudential Instruments Policy Instruments: Example of a Counter-Cyclical Tool Counter-cyclical capital buffer (CCB) [operational as of ] Part of the Basel III agreement; EU implementation through CRD IV CCB (in % of RWA) 0% - 2.5% > 2.5% mainly based on credit-to-gdp gap [credit/gdp*100-trend]; ESRB approved Mandatory reciprocity Voluntary reciprocity reviewed quarterly based on different indicators; reflecting structural risk no reciprocity allowed reviewed annualy; lawfulness checked by ESRB and EBA Reciprocity: e.g. ESP imposes CCB of 2% => Banks in GER have to apply it to their Spanish exposure CCB Bank = exposure weighted average of national CCBs Page 22

23 Macroprudential Instruments Policy Instruments: Example of a Counter-Cyclical Tool (2) Historic simulation of a possible CCB in Germany: Source. Deutsche Bundesbank, Financial Stability Review Page 23

24 Macroprudential Instruments Policy Instruments: Structural and Crisis Management Financial Market Stabilisation Agency (FMSA) Financial Market Stabilisation Fund (Soffin) reactivated ( 480 billion) toolkit: o guarantees o recapitalisation o resolution agencies o (bad banks) Restructuring Fund financed by bank levy target volume: 70 billion; (in run-up borrowing is possible) Page 24

25 Macroprudential Policy in Germany and the EU 1) Policy Framework in Europe 2) Macroprudential Policy in Germany 3) Macroprudential Instruments 4) Research and Analytical Instruments 5) Conclusion Page 25

26 Research and Analytical Instruments Research in Macroprudential Issues Progress in research on macroprudential issues, e.g. Bundesbank Working Papers/Discussion Papers: Düllmann und Puzanova (2011), Systemic risk contributions: A credit portfolio approach Memmel, Sachs und Stein (2011), Contagion at the Interbank Market with stochastic LGD Podlich und Wedow (2011), Credit Contagion between Financial Systems Brumm/Kubler/Grill/Schmedders (forthcoming): Optimal Regulation of Margin Requirements. Hilberg und Meller (forthcoming): All we need is market discipline? What macroprudential regulators can learn from bond markets. Page 26

27 Research and Analytical Instruments Research in Macroprudential Issues (2) Further current fields of research: Measurement of systemic risk and development of a financial stability indicator Early warning systems for systemic crises Measurement of interconnectedness in the financial system and estimation of resulting contagion risks Transmission channels of instruments proposed in basel III also on the real economy Optimal degree of transparency, e.g. concerning stress tests Quantification of refinancing advantages of SIFIs Page 27

28 Research and Analytical Instruments Systemic Risk Analysis: Instruments Financial stability indicators Stress testing Contagion models Analysis on systemic importance Page 28

29 Research and Analytical Instruments Systemic Risk Analysis: Financial Stability Indicators Selection of Indicators needs to take into account: Structure of the financial system i.e. key players and their interdependencies Relevant risk factors for the set of players paying due regard to business models Timely reflection and identification of emerging risks Risk categories: Credit -, market - and interest rate, liquidity risk, interlinkages and imbalances, risk bearing capacity for German and other systemically important international institutions, macroeconomic environment in Germany, Europe, other global players Page 29

30 Bottom-up Top-down Research and Analytical Instruments Systemic Risk Analysis: Stress Tests Credit Risk Market Risk Liquidity Risk Sensitivity Capital Stress Tests Macroprudential Stress Tests: - Income Stress Test -Three Stage Model - Portfolio Model Stress Tests based on the new Basel Liquidity Standards EU-wide Stress Testing Exercise (EBA) - Interest Rate Risk - Credit Spread Risk - Equity Risk - Exchange Rate Risk - Volatility Risk Liquidity Monitoring Tool Page 30

31 Research and Analytical Instruments Systemic Risk Analysis: Stress Tests Sensitivity Stress Tests Capital Stress Tests Macroprudential Stress Tests Income Stress Tests Multi Stage Models Macroeconomic Portfolio Stress Tests Market Risk Stress Tests Liquidity Risk Stress Tests Top-down and Bottom-up Approach Liquidity Monitoring Page 31

32 Research and Analytical Instruments Systemic Risk Analysis: Contagion Network approaches: institutional data; financial institution s resilience to the domino effects o Data constrains Interdependence models: market data; cross-sectional financial linkage using statistical correlations o Co-Movements: monitoring systemic risk emanating from international financial systems o Co-Crash Probabilities: measuring correlation of default risk of financial institutions Page 32

33 Research and Analytical Instruments Systemic Risk Analysis: Systemic Importance "Too systemic to fail" institutions o How to deal with such institutions? o Identify the degree of systemic importance o Compute individual institution's share of overall systemic risk Conditional risk models: o o o Marginal impact: A bank's contribution to overall systemic risk Conditional VaR Credit Portfolio Approach Page 33

34 Macroprudential Policy in Germany and the EU 1) Policy Framework in Europe 2) Macroprudential Policy in Germany 3) Macroprudential Instruments 4) Research and Analytical Instruments 5) Conclusion Page 34

35 Conclusion European macroprudential structure is in place Macroprudential supervision in Germany will be considerably strengthened and has a clear statutory mandate Bundesbank to be assigned a key role: o Risk identification o Preparation of actions Bundesbank stands ready to assume its new tasks Page 35

36 Conclusion (2) Germany is compliant with the ESRB Recommendation Warnings and recommendations as communication tools should not be underestimated Development of analytical toolbox has advanced Further development of preventive instruments necessary Data gaps are being filled Page 36

37 Thank you very much for your attention! Muchas gracias por su atención! Robert Düll Tel.: Page 37