The Bank of Greece monitors developments in the financial system and identifies potential systemic risks.
The Bank subsequently elaborates and implements measures to reduce the build-up of systemic risks and strengthen the resilience of the financial system. Macroprudential policy is the set of such measures.
Macroprudential measures pertain to the financial system as a whole or significant parts thereof, whereas microprudential supervision concerns individual financial institutions. The ultimate objective of macroprudential policy – the macroprudential mandate – is to safeguard financial stability.
In pursuing the ultimate objective of safeguarding financial stability, the Bank of Greece seeks to achieve the following intermediate objectives:
- preventing excessive credit growth and leverage;
- preventing and mitigating excessive maturity mismatch and market illiquidity;
- limiting direct and indirect exposure concentrations;
- limiting the systemic impact of misaligned incentives with a view to reducing moral hazard;
- strengthening the resilience of financial infrastructures.
Macroprudential policy strategy
The Bank of Greece has defined its strategy for the conduct of macroprudential policy, which links the above intermediate objectives with available macroprudential measures, in the following stages:
- The risk monitoring stage, where relevant indicators help to detect vulnerabilities in the financial system and to identify the associated systemic risks;
- The instrument selection stage, with a view to preventing and mitigating the relevant systemic risks;
- The implementation stage, where decisions are made on the use (activation, calibration, deactivation) of the appropriate macroprudential measures to achieve the intermediate objectives of macroprudential policy.
- The evaluation stage, where the impact of macroprudential measures is assessed and relevant conclusions are drawn.
The regulatory framework for achieving macroprudential policy objectives provides for a set of macroprudential measures.