0 used to describe laws, rules, and conditions for banks and financial organizations which are intended to protect the whole financial system from risk: --
macroprudential policy/regulation/supervision
In line with this reasoning, macroprudential policy addresses the interconnectedness of individual financial institutions and markets, as well as their common exposure to economic risk factors.
This paradigm, however, assumes that risk arises from individual malfeasance, and hence it is at odds with the emphasis on the system as a whole which characterizes the macroprudential approach.
Thus, a complementary relationship between macroprudential and monetary policy has been advocated, even if the macroprudential supervisory authority is not given to the central bank itself.
Though highly quantitative, his work strives to shed light on practical issues such as macroprudential regulation, mitigating the impacts of economic crises or understanding the implications of fiscal policies.
This is an important welfare-theoretic justification for macroprudential regulation.
Some theoretical studies indicate that macroprudential policies may have a positive contribution to long-run average growth.
Therefore, global coordination of macroprudential policies is considered as necessary to foster their effectiveness.
Hence, they infer a potentially substantial leakage of macroprudential regulation of bank capital.