What justifies the need for macroprudential policy?
The magnitude of economic losses caused by the global financial crisis demonstrated the crucial importance of the stability of the financial system in the viability of a country’s economy. The crisis underscored that microprudential interventions alone are unable to prevent the financial disturbances that inflict heavy losses on the real economy. The systemic spread of foreign currency lending and the economic and social problems arising therefrom are excellent examples of the need for prudential interventions with a systemic focus.
The ultimate objective of macroprudential policy is to mitigate excessive systemic financial risks. This means that it should strive to prevent severe financial crises and minimise their effects on the real economy if they nevertheless arise. The set of objectives of macroprudential policy are summarised in the chart below.
The macroprudential framework of the MNB
Source: MNB
Macroprudential strategy of the MNB
In January 2016, the MNB published the macroprudential strategic framework titled „Stability Today - Stability Tomorrow”, which summarizes and presents to the public the principles and practical considerations of the central bank ensuring the stability of the financial system as a whole. The strategy has so far been reviewed by the MNB in 2018 and 2022.