ESRB publishes recommendation on the macro-prudential mandate of national authorities

The European Systemic Risk Board (ESRB) has today published a set of recommendations addressed to the EU Member States on the macro-prudential mandate of national authorities (Document reference: ESRB/2011/3).

Effective macro-prudential supervision at the national and European level should be enhanced by the establishment of an efficient macro-prudential policy framework in the EU Member States.

Under the recommendation, Member States should designate an authority in national legislation to conduct macro-prudential policy. Generally speaking, and taking due consideration of national institutional frameworks, such a macro-prudential authority should be either a single institution or an ad hoc board composed of all institutions whose actions may affect financial stability. The ultimate objective of the macro-prudential authority should be to safeguard the stability of the financial system.

The ESRB recommends that EU Member States bestow the macro-prudential authority with the powers to conduct macro-prudential policy on its own initiative or as a follow-up to recommendations or warnings from the ESRB. Cooperation between the national macro-prudential authorities and the ESRB would be warranted, particularly to enable the timely identification and subsequent discussion of relevant cross-border issues.

In order to perform its tasks (i.e. identifying, monitoring, assessing and addressing potential risks to financial stability), the national authority should have full access to all the necessary statistical information and policy instruments.

EU Member States are also called upon to confer on the authority the necessary independence for it to fulfil its tasks, to ensure an adequate level of accountability and to reserve the maximum of transparency. In particular, the ESRB recommends that macro-prudential authorities should be able to issue public and/or confidential statements on systemic risk; they should also make public all macro-prudential policy decisions and explain the reasons behind such decisions. Furthermore, macro-prudential authorities should be accountable to national parliaments, but their staff should be legally protected when they act in good faith. Finally, national macro-prudential authorities should be independent from the influence of political and market-players concerning both operational and policy issues.

The ESRB would like to see this recommendation trigger the necessary national initiatives at both parliamentary and government levels to ensure such steps are taken.

More specifically, regarding implementation of the recommendations, the ESRB calls on the EU Member States to take the necessary actions before 1 July 2013 and, by June 2012, to communicate their intentions with respect to implementation and to report on developments to date.