Manuel A. Muñoz, 03 July 2020

According to the evidence, banks in the euro area are particularly reluctant to cut back on dividends during economic recessions. That is, the bulk of the adjustment in the face of negative shocks that hit bank profits is borne by undistributed net income. This column argue that this pattern can notably exacerbate the impact of a negative supply shock such as the COVID-19 pandemic on bank lending and economic activity. Using a macro-banking DSGE model calibrated to quarterly data of the euro area economy, it concludes that restricting dividend distributions has the potential to significantly improve the effectiveness of the countercyclical capital buffer release in ensuring that banks keep funding households and firms during the COVID-19 crisis.

Gabriele Cozzi, Matthieu Darracq Pariès, Peter Karadi, Jenny Körner, Christoffer Kok, Falk Mazelis, Kalin Nikolov, Elena Rancoita, Alejandro Van der Ghote, Julien Weber, 03 March 2020

Following the financial crisis, central banks and regulatory authorities assumed new powers to set macroprudential bank capital requirements. This column describes a number of macro models used by the ECB to measure the real impact of capital requirements and their interactions with monetary policy. It warns that a weaker banking system amplifies the impact of monetary policy and contributes to economic instability. Banks’ capital buffers are best augmented during times of affluence, when looser monetary policy can mitigate the costs of increasing capital requirements.

Aerdt Houben, Janko Cizel, Jon Frost, Peter Wierts, 05 November 2019

Macroprudential policies are being implemented around the globe. A key question is whether these policies prompt substitution toward the non-bank financial sector. This column presents compelling evidence of such ‘waterbed effects’ after macroprudential policy action. Substitution towards non-bank credit is stronger when policy measures applied to banks are binding and are implemented in countries with well-developed financial markets. While systemic risks may nonetheless decline, waterbed effects highlight the importance of developing macroprudential policies beyond banking. 

Marcin Bielecki, Michał Brzoza-Brzezina, Marcin Kolasa, Krzysztof Makarski, 18 September 2019

The boom-bust cycle in the euro area periphery has almost toppled the euro. This column suggests that region-specific macroprudential policy could have substantially smoothed the credit cycle in the periphery and reduced the build-up of external imbalances. In contrast, common monetary policy could have stabilised output in both the periphery and the core slightly better, but it would have been incapable of significantly influencing either housing markets or the periphery’s trade balance. The column also offers policy guidelines in case internal imbalances should arise again in the euro area. 


The European Central Bank is organising the fourth annual macroprudential policy and research conference, which will take place in the afternoon on 16 December and all day on 17 December 2019 in Frankfurt am Main.

The aim of the conference is to encourage interaction between research and policy practice in the area of macroprudential regulation.

Programme for the 2018 conference

In 2019 the conference will focus on the interaction between macroprudential policy and monetary policy. It will also cover topics such as the following:

  • the impact, implementation and evaluation of macroprudential regulation and policy
  • the coordination of macroprudential policies across countries
  • the future of banking and financial markets, and their stability, in the context of new macroprudential regulations
  • liquidity regulations, countercyclical capital buffers and their interaction

Jeremy Stein (Harvard University) will deliver a keynote speech.

Submission of papers

Please submit full papers in PDF to [email protected] by 20 September 2019. Authors of accepted papers will be notified by 9 October 2019.

Adrian Alter, Gaston Gelos, Heedon Kang, Machiko Narita, Erlend Nier, 03 April 2019

The IMF’s new iMaPP database integrates five major existing databases to build a comprehensive picture of macroprudential policies in use globally. This column shows how this rich dataset provides novel insights into the non-linear effects of changes in loan-to-value limits as one example of how better data can help policymakers to use macroprudential tools more precisely and effectively.

David Martinez-Miera, Rafael Repullo, 27 March 2019

Various factors have been advanced as possible causes of the build-up of risks leading to the Global Crisis, and multiple policies have been put forward to address them. This column discusses the effectiveness of monetary policy and macroprudential policy in responding to the build-up of risks in the financial sector. While both policies are useful, macroprudential policy is more effective in terms of financial stability and can lead to higher welfare gains.

Jane Kelly, Julia Le Blanc, Reamonn Lydon, 25 November 2018

Loan-to-value limits and other borrower-based macroprudential measures are now used in two-thirds of advanced economies. This column uses survey data to document changes in credit standards in a cross-section of countries in the run-up to, and aftermath of, the financial crisis. There is clear evidence of laxer credit standards in countries that experienced a real estate boom-bust, and a significant tightening after the bust. The results imply that compared to earlier years, younger and lower-income borrowers have to save for longer before buying.

Björn Richter, Moritz Schularick, Ilhyock Shim, 21 September 2018

Central banks have increasingly relied on macroprudential measures to manage the financial cycle, but their effects on the core objectives of monetary policy to stabilise output and inflation are largely unknown. This column shows that the output costs of changes in maximum loan-to-value ratios are rather small, especially in advanced economies. At the same time, such policies successfully reduce household and mortgage credit growth. The results suggest that central banks could be in a position to use macroprudential instruments to manage financial booms without interfering with the core objectives of monetary policy in a major way. 

Eugenio Cerutti, Stijn Claessens, Luc Laeven, 18 September 2018

The Global Crisis was a catalyst for the adoption of macroprudential policies around the world. Using newly updated data, this column examines the adoption of macroprudential policy instruments from 2000 to 2017. Since 2015, advanced economies have on average been using more instruments than emerging economies and low-income countries. While some instruments seem to be effective, it remains to be seen whether this suite of policies can deliver overall financial stability.

Jon Danielsson, Robert Macrae, 12 September 2018

Financial policy is determined in multiple domains by separate government authorities. This column explores the hierarchical ranking of these domains and authorities. On top is the authority in charge of fiscal policy, followed by those running monetary, microprudential, and finally macroprudential policies. This ranking can cause conflicts in terms of policy effectiveness and legitimacy.

Jon Danielsson, 03 July 2018

Jin Cao, Valeriya Dinger, 03 May 2018

The effectiveness of monetary policy in dictating banking activities is one of the keys to understanding how efficient monetary policy is in tuning the real economy. This column uses data on Norwegian banks to show that efficiency may be eroded by international financial flows in a small open economy. This raises several challenges for central banks and financial regulatory agencies in such economies.

Irina Stanga, Razvan Vlahu, Jakob de Haan, 15 March 2018

Mortgage delinquency triggered the liquidity crisis that turned into the Global Crisis. Ten years on, mortgage lending still accounts for a large share of both household debt and banks’ assets. This column examines the incidence of mortgage arrears using a dataset for 26 countries from 2000 to 2014. The results show that higher unemployment is associated with an increase in defaults, while higher house prices have a strong negative association with defaults. The analysis suggests that dealing effectively with mortgage default requires a mix of prudential regulation and institutional design improvements.

Natalia Tente, Natalja von Westernhagen, Ulf Slopek, 06 December 2017

Regulators are still debating the amount of capital needed to support bank losses in a financial crisis. This column presents a new, pragmatic stress-testing tool that can answer the question under macroeconomic stress scenarios. The method models inter-sector and inter-country dependence structures between banks in a holistic, top-down supervisory framework. A test of 12 major German banks as of 2013 suggests that while there is enough capital in the system as a whole, capital allocation among the banks is not optimal.

Yener Altunbaş, Mahir Binici, Leonardo Gambacorta, Andres Murcia, 05 December 2017

The main objective of macroprudential tools is to reduce systemic risks – in particular, the frequency and depth of financial crises. Most studies look at the impact of macroprudential measures on credit growth, focusing on country-wide data or bank-level information. This column presents new evidence using credit registry data at the bank-firm level to evaluate the impact on bank risk measures. Results show that macroprudential tools help stabilise credit cycles and contain bank risk.

Yener Altunbaş, Simone Manganelli, David Marques-Ibanez, 14 November 2017

Prudential supervision of banks has increasingly relied on capital requirements. But bank capital played a relatively minor role in predicting bank solvency during the Global Crisis, except for scarcely capitalised banks. This column argues that while capital is a helpful tool to support bank financial stability, it is complex for supervisors to calibrate it precisely. Macroprudential authorities should be able to complement capital-based tools with additional, borrower-based prudential instruments.


This advanced course focuses on financial and prudential aspects of the shadow banking sector, with some attention to its legal underpinnings.

This course will focus on:
- Shadow banking as a financial segment that expands and contracts credit outside the regulatory perimeter.
- Key elements of shadow banking regulation, emerging issues related to macro-prudential policy.
- European (as well as some US) legislation on insurance companies, money mutual funds and central clearing platforms for derivatives.
- Review of typical shadow banking funding and lending strategies.

Course Instructors: Enrico Perotti, Bart Joosen and Roger Laeven (University of Amsterdam); Iman van Lelyveld (Free University of Amsterdam and DNB)
Area: Financial Stability and Regulation
Level: Intermediate

Further information and registration:
Registration deadline: 9 October 2017

Ed Balls, Anna Stansbury, 01 May 2017

Until recently, the independence granted to the Bank of England 20 years ago had gone unchallenged. But the financial crisis has raised questions over whether central bank independence is necessary, feasible, and democratic. This column revisits the relationship between inflation and the operational and political independence of the central bank in advanced economies. The findings support the Bank of England model of monetary policy independence: fully operationally independent, but somewhat politically dependent. To make operational independence work, however, further reforms are needed to the model in both monetary–fiscal coordination and macroprudential policy.

Domenico Lombardi, Pierre Siklos, 11 April 2017

Macroprudential policies increasingly lie at the heart of how central banks jointly manage of price and financial stability. However, consensus over best practice has yet to emerge. This column presents an improved indicator to measure individual economies’ macroprudential policy capacity. Improvements include incorporating the shadow banking sector, and distinguishing the types of institutions that wield authority. Results suggest that improvements continue to be made with respect to the development of an international financial system with improved resilience to shocks. 



CEPR Policy Research