№ 7/2020

Ekon Ukr. 2020 (7): 55–63https://doi.org/10.15407/economyukr.2020.07.055

УДК 339.97; 339.923

JEL:

PETRYK Oleksandr¹, КUZNYETSOVA Аnzhela²

¹Banking and Insurance, Banking University, Research ID : http://www.researcherid.com/rid/
OrcID ID : https://orcid.org/
² Banking University, Research ID : http://www.researcherid.com/rid/O-8530-2018
OrcID ID : https://orcid.org/0000-0003-3590-7625

MACROPRUDENTIAL POLICY IN CRISIS CONDITIONS

The functions of prudential banking supervision and banking regulation have always been key in the activities of central banks or independent regulators of banking systems. But before the global crisis of 2007-2008, the emphasis was more on microprudential aspects, which were based on the liquidity and solvency ratios of individual banking institutions and the regulation of their activities. But this crisis has shown that even with price stability and proper supervision of individual banks, this is not enough to maintain the overall macroeconomic stability of the financial system as a whole. “Bubbles” in the real estate market, the existence of “moral hazard” in bank lending to related party (businesses related to banks) and the corresponding bankruptcies of banks have led to a radical reform of both banking regulation and the introduction of de jure financial stability as the main function of financial market regulators. This was aimed at preventing significant economic and financial losses due to weak financial systems, inadequate macroprudential regulation and the corresponding propensity of people and businesses to panic in the event of a crisis. To achieve this goal, regulators use tools of macroprudential instruments and regulations. Important aspects of this policy are to prevent the development of financial destabilization, and in the case of risks associated with financial or real negative shocks, to significantly mitigate their negative impact on the economy and finances.
In the current context of permanent crises, and in particular the global pandemic crisis, it is important for central banks to adhere to the key tenets of macroprudential regulation, and therefore to be flexible in the use of regulatory standards and macroprudential instruments; minimize opportunities for moral hazard and maintain a commitment to global best practices in credit risk management; manage the classification of assets that allow for sound risk management and prevent weakening of regulatory definitions that will result in an increase in non-performing loans (NPLs); promptly review macroprudential priorities in close dialogue with government and business.

Keywords:macroprudential policy; financial stability; central bank; macroprudential instruments.

Article original in Ukrainian (pp. 55 - 63)

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The article was received by the Editorial staff on June 25 , 2020

References
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