(2020), “Volatility-targeting strategies and the market sell-off”, Financial Stability Review, ECB, May. [11] According to ECB simulations, assets worth nearly 225% of the portfolio’s capital had to be sold in order to meet the volatility target. The simulation assumes a leveraged investor with a diversified portfolio including equities, corporate and government bonds. In this stylised model, relative portfolio weights are adjusted on a daily basis to equalise the risk contributions of the constituent assets of the portfolio considering the daily estimates of portfolio variances and covariances. The level of leverage is set in a way to bring the expected portfolio volatility in line with the volatility target. For more details, see Vassallo, D. et al., op.cit. [12] The liquidity effects of initial margins are likely to increase further in the future. Today, around two-thirds of non-banks’ derivative exposures are not centrally cleared. Initial margin requirements remained fairly stable for these contracts during the turmoil. However, as the implementation and application of the over-the-counter derivatives reform progresses, an increasing number of contracts will be moved to central clearing and an increasing number of non-centrally cleared contracts will become subject to initial margin payments. See also Fache Rousová, L. et al. (2020), “Derivatives-related liquidity risk facing investment funds”, Financial Stability Review, ECB, May. [13] Surveys confirm that variation margin calls led to strained liquidity situations for some non-banks. See the results of the June 2020 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD). [14] ECB (2020), Financial Stability Review, November, forthcoming.

See, for example, Crockett, A. (2000), “Marrying the  micro- and macroprudential dimensions of financial stability”, BIS speeches, 21 September; Borio, C (2003), “Towards a macroprudential framework for financial supervision and regulation?”, CESifo Economic Studies, 49: 181–216. 5 See ESRB (2014), op. cit. 6 See, for example, Recommendation of the European Systemic Risk Board of 22 December 2011 on the macro-  prudential mandate of national authorities (ESRB/2011/3); Recommendation of the European Systemic Risk Board of 4 April 2013 on intermediate objectives and instruments of macro-prudential policy (ESRB/2013/1); the ESRB response to the European Commission’s Consultation Document on the “Review of the EU Macroprudential Policy Framework”; and the ESRB handbook on operationalising macroprudential policy in the banking sector. 7 See the ESRB’s website for a breakdown by country. The ESRB’s annual review of macroprudential policy in the  EU provides a detailed description of these measures. 8 Belgium, Denmark, Finland, Luxembourg, the Netherlands and Sweden. 9 Czech Republic, Germany, France, Iceland and Norway. 10 Hellwig, M (2009), “Systemic Risk in the Financial Sector: An Analysis of the Subprime-Mortgage Financial  Crisis”, De Economist, 157(2): 129–207. 11 3/4  BIS central bankers' speeches  11 See ESRB (2018), Macroprudential provisions, measures and instruments for insurance, November. For recent  work on the topic by the European Insurance and Occupational Pensions Authority (EIOPA), see, for example, EIOPA (2019), Discussion Paper on systemic risk and macroprudential policy in insurance, March. 12 ESRB (2019), Features of a macroprudential stance: initial considerations, April. 4/4  BIS central bankers' speeches