Recent Developments in Banking and Financial Supervision: The Rise of Macro-Prudential Regulation

The recent economic crisis has highlighted the need for urgent regulatory reform. Drawing on lessons from financial instabilities, a growing demand has emerged for the expansion of the boundaries of financial regulation beyond that of a mere micro-based approach to supervision. A new regime has taken shape that builds on a holistic view of the financial system. Examining the current regulatory agenda of policymakers demonstrates this shift in emphasis towards a new paradigm that requiresthe mitigation of systemic threats to financial stability through a ‗macro-prudential approach‘ to regulation. In the wake of the crisis, an increasing number of countries are adopting macro-prudential supervisory policies and introducing simultaneous changes to their institutional infrastructures to support the implementation of the newregulatory regime. In this paper, we present an overview of the current discussion on systemic risks and demand for macro-prudential financial regulation and supervision. In doing so, we first outline the conceptual underpinnings and general objectives of macro-prudential regulation along with a general discussion on the key sources of ystemic problems in the financial system. we examine the attributes of policies and tools underlying the implementation of the macro-prudential approach and thesignificance of effective coordination between monetary policy and macro- and micro-level supervisory practices. Building on these grounds, we then provide an analyzis of the state of play of regulatory proposals at the international level as well as recent financial reforms in the UK, the EU and the US. The outline presented in this paper will be relevant to central bankers, prudential regulators and financial policymakers in Iran and other developing economies in that it offers a platform for improvingtheir framework of regulatory policies and instruments as well as for pursuing future objectives of creating robust macro- and micro-prudential supervisory regimes.

کلیدواژه ها:

macro-prudential regulation ، systemic risks ، financial crises