claudia buch : public hearing on the review of the eu macroprudential framework – panel discussion statement by prof claudia buch, deputy president of the deutsche bundesbank, at the public hearing on the review of the eu macro - prudential framework - panel discussion, european commission, brussels, 7 november 2016. * * * 1. overview after the financial crisis, macro - prudential policy has been established as a new policy area with the mandate to ensure the stability of the financial system as a whole and to prevent systemic risks building up. systemic risks in financial systems arise if distress in one institution or a group of financial institutions threatens the functioning of the entire financial system. resilience of the financial system with regard to systemic stress thus requires buffers which take these externalities into account. experience with macro - prudential policies is limited though, which requires a continuous monitoring of the progress that has been made. the consultation process that has been launched by the european commission on the macro - prudential framework is a key element of monitoring the effectiveness and efficiency of macro - prudential institutions. effective macro - prudential policies are particularly needed at the european level, given the close real and financial linkages between member countries of the european union ( eu ). effective macro - prudential policies require an institutional set - up with three key characteristics. first, the institutional set - up should allow tracking potential risks to financial stability. second, it should clearly assign responsibility for the use of macro - prudential instruments. third, it should allow for the effective coordination between institutions tasked with macro - prudential mandates. in this regard, the european systemic risk board ( esrb ) has a critical function. maintaining its current strength and improving its institutional set - up, where needed, should thus be a priority. maintaining and strengthening the role of the esrb gives rise to questions concerning its mandate and its role as well as the organizational structure and the institutional links with the ecb. when the esrb was established, the ecb did not have the role of a micro - prudential banking supervisor nor did it have macro - prudential responsibilities in the banking sector. this has changed with the banking union and the establishment of the single supervisory mechanism ( ssm ). therefore, potential changes in the esrb ’ s organizational structure and its ties to the ecb should reflect the ecb ’ s new role in the ssm. overall, the esrb

regard to specific macro - prudential measures, the ecb has asymmetric intervention powers : according to article 5 of the ssm regulation, the ecbmay – after consultation with the national supervisory authorities – tighten macro - prudential measures enshrined in the crd iv but not ease them. cross - border and cross - sectoral surveillance given the importance of national risk factors and institutional specificities that affect systemic risks, surveillance of systemic risk has a strong domestic component. thus various authorities, in particular central banks, which traditionally maintain capacities for a holistic analytical view combining cross - sectoral views with micro - and macroeconomic analysis, contribute to macroprudential surveillance through the esrb. at the same time, domestic ( macro - ) prudential policies spill over across borders through the activities of internationally active banks and other financial institutions. current research conducted by the international banking research network ( ibrn ), for instance, shows that prudential instruments often spill over across borders through bank lending. 2 at the same time, international spillovers vary across prudential instruments and are heterogeneous across banks. bank - specific factors like balance sheet condition and business model drive the amplitude and direction of spillovers to lending growth rates. accounting for bank - level heterogeneity is thus crucial for understanding the effects of prudential policies. in the past, international spillovers of prudential policy on loan growth rates have not been large on average, but have the potential to grow with broader use of macro - prudential instruments. hence, macro - prudential policies and institutions are inherently complex because they involve authorities taking cross - sectoral perspectives ( banking, insurance, other financial intermediaries and financial market infrastructures ), micro - and macroeconomic perspectives, and crosscountry perspectives. there is, thus, no single institutional set - up for the organization of macroprudential policies and the assignment of powers. 3 generally though, central banks play an important role in macro - prudential policies across countries, reflecting their expertise in analyzing macroeconomic, system - wide developments in the financial sector and the real economy. the current institutional set - up of the esrb reflects these different perspectives, and the esrb has been effective in coordinating these perspectives across european countries. 2 / 5 bis central bankers'speeches the esrb as a body of independent experts provides a forum to openly discuss macroprudential issues from different angles.