Towards a Macroprudential Surveillance and Remedial Policy Formulation System for Monitoring Financial Crisis

Several developing economies witnessed a large number of systemic financial and currency crises since the 1980s which resulted in severe economic, social, and political problems. The devastating impact of the 1982 and 1994-95 Mexican crises, the 1997-98 Asian financial crisis, the 1998 Russian crisis and the ongoing financial crisis of 2008-2009 suggest that maintaining financial sector stability through reduction of vulnerability is highly crucial. The world is now witnessing an unprecedented systemic financial crisis originated from USA in September 2008 together with a deep worldwide economic recession, particularly in developed countries of Europe and North America. This calls for devising and using on a regular basis an appropriate and effective monitoring and policy formulation system for detecting and addressing vulnerabilities leading to crisis. This paper proposes a macroprudential/financial soundness monitoring, analysis and remedial policy formulation system that can be used by most developing countries with or without crisis experience as well as developed countries with limited data. It also discusses a process for identifying, and compiling a set of leading macroprudential indicators/financial soundness indicators. An empirical illustration using Philippines data is presented.economic and financial vulnerability, macroprudential indicators and financial soundness indicators analysis, macroprudential surveillance and policy, developing countries, financial sector, currency and financial crises, Early Warning Models, Stress Test

Macroprudential stress-testing practices of central banks in central and south eastern Europe : an overview and challenges ahead

Stress tests are the main practical tools of macroprudential oversight. This paper reviews the stress-testing practices of central banks in Central and South Eastern Europe (CSEECBs) and outlines the challenges in the area of stress testing going forward. The authors discuss good practice and the applied approaches by CSEECBs focusing on the main components of a typical macroprudential stress test, i.e. constructing the baseline and stress scenarios, mapping macroeconomic scenarios and microeconomic factors to risk factors, calculating risk exposures to different risk indicators, and estimating outcome indicators to inform macroprudential policy. The main challenges for the CSEECBs going forward involve needed improvements in data reliability, consideration of quantitative microprudential indicators in macroprudential stress tests, explicit incorporation of dynamics in stress tests to include reaction functions of banks and macroprudential policy, institutionalization of macroprudential policy responses to alarming stress-test results, use of the top-down and bottom-up stress test results in supervisory communication, cooperation of macroprudential and microprudential supervision, and information exchange for better cross-border supervision of international banking groups.Banks&Banking Reform,Debt Markets,Currencies and Exchange Rates,Emerging Markets,Financial Intermediation

Using the framework of the Community Reinvestment Act to support rural communities in China

Community development ; China

Home Ownership Risk Beyond a Subprime Crisis: The Role of Delinquency Management

A surge in delinquency among risky subprime home mortgages has produced calls for front-end regulatory fixes as well as emergency foreclosure avoidance interventions. Whatever the merit of those interventions, this Essay calls for home mortgage delinquency management to be conceptualized as an enduring component of housing policy. The Essay identifies and evaluates a framework for the management of delinquency that is not limited to formal foreclosure law and includes other debtor-creditor laws such as bankruptcy, industry loss mitigation efforts, and third-party interventions such as delinquency housing counseling. The Essay also proposes that delinquency management be evaluated through the lens of objectives commonly used to justify public investment in home ownership and home mortgage markets: to build household wealth and economic self-sufficiency, to generate positive social-psychological states, and to develop stable neighborhoods and communities. Because those ends are not inexorably linked to ownership generally or owning a particular home, a system of delinquency management that honors these objectives should strive to provide fair, transparent, humane, and predictable strategies for home exit as well as for home retention

Consumer credit in comparative perspective

We review the literature in sociology and related fields on the fast global growth of consumer credit and debt and the possible explanations for this expansion. We describe the ways people interact with the strongly segmented consumer credit system around the world—more specifically, the way they access credit and the way they are held accountable for their debt. We then report on research on two areas in which consumer credit is consequential: its effects on social relations and on physical and mental health. Throughout the article, we point out national variations and discuss explanations for these differences. We conclude with a brief discussion of the future tasks and challenges of comparative research on consumer credit.Accepted manuscrip

Macroprudential Approach to Regulation-Scope and Issues

This paper provides an overview of the Reserve Bank of India's approach to macroprudential regulation and systemic risk management, and reviews lessons drawn from the Indian experience. It emphasizes the need for harmonization of monetary policy and prudential objectives, which may not be possible if banking supervision is separated from central banks. It also notes that supervisors need to have the necessary independence and flexibility to act in a timely manner on the basis of available information. Macroprudential regulation is an inexact science with limitations and needs to be used in conjunction with other policies to be effective.macroprudential regulation; systemic risk management; monetary policy; banking supervision; central banks

Credit bureaus between risk-management, creditworthiness assessment and prudential supervision

"This text may be downloaded for personal research purposes only. Any additional reproduction for other purposes, whether in hard copy or electronically, requires the consent of the author. If cited or quoted, reference should be made to the full name of the author, the title, the working paper or other series, the year, and the publisher."This paper discusses the role and operations of consumer Credit Bureaus in the European Union in the context of the economic theories, policies and law within which they work. Across Europe there is no common practice of sharing the credit data of consumers which can be used for several purposes. Mostly, they are used by the lending industry as a practice of creditworthiness assessment or as a risk-management tool to underwrite borrowing decisions or price risk. However, the type, breath, and depth of information differ greatly from country to country. In some Member States, consumer data are part of a broader information centralisation system for the prudential supervision of banks and the financial system as a whole. Despite EU rules on credit to consumers for the creation of the internal market, the underlying consumer data infrastructure remains fragmented at national level, failing to achieve univocal, common, or defined policy objectives under a harmonised legal framework. Likewise, the establishment of the Banking Union and the prudential supervision of the Euro area demand standardisation and convergence of the data used to measure debt levels, arrears, and delinquencies. The many functions and usages of credit data suggest that the policy goals to be achieved should inform the legal and institutional framework of Credit Bureaus, as well as the design and use of the databases. This is also because fundamental rights and consumer protection concerns arise from the sharing of credit data and their expanding use