First find the buzzword. Then find the meaning.
From the Bank of International Settlements: nine pages on the origins and meaning of the term “macro-prudential.” Number of times the term has already appeared on the BIS website: more than 350.
Anyway, here’s the first reference to the term that the paper’s author, Piet Clement, could find.
It’s from the minutes of a 1979 Cooke Committee — the precursor to the Basel Committee — meeting to discuss the possibility of collecting data on maturity transformation for international bank loans:
“The Chairman [W P Cooke, Bank of England] said that micro-economic problems (which were of concern to the Committee) began to merge into macro-economic problems (which were not) at the point where micro-prudential problems became what could be called macro-prudential ones. The Committee had a justifiable concern with macro-prudential problems and it was the link between those and macro-economic ones which formed the boundary of the Committee’s interest.”3 [emphasis added]
Since then the term’s come to mean the use of prudential tools — the things regulators use to encourage financial prudence — to improve the stability of the entire financial system, as opposed to just bits and pieces of it.
And the term’s been used by central bankers from Ben Bernanke to Mervyn King, so it’s about time someone got to the bottom of what it actually means, and from whence it came.
Anyway, also out today from BIS:
- Latest BIS Quarterly Review — all about sovereign risk.
- The architecture of global banking: from international to multinational?
- Exchange rates during financial crises
- The dependence of the financial system on central bank and government support
(H/T Alea)
Related links:
Strengthening macro-prudential supervision in Europe – ECB
The role of macroprudential policy – BoE
Making macroprudential concerns operational – BIS
Macroprudential indicators of financial system soundness - IMF