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With the establishment of the Single Supervisory Mechanism, the ECB was given micro- and macroprudential responsibilities and powers. This set-up aims to ensure that the two policies are well coordinated. At the same time, the current macro-financial environment has become more challenging.
The bleaker and more uncertain outlook can create strains for bank profitability. Challenges also arise for the non-bank sector with potential spillovers to the banking sector.
Mr Luis de Guindos says: “So for us to ensure the stability of the banking sector, we also need to deepen our understanding of the role of non-bank institutions in the financial system and monitor the risks associated with their activities.”
Continuing to provide a consistent policy response in the current macro-financial environment requires the countercyclical role of macroprudential policy to be strengthened by ensuring that releasable buffers are available.
Ultimately, the microprudential and macroprudential functions will need to rely on each other to provide successful prudential policies that ensure financial stability and support financial intermediation.