Strategic Framework for Macroprudential Policy
The financial crisis has shown the need for a clearer definition of macroprudential policy and macroprudential supervision to mitigate and prevent systemic risk in the financial system. The Macroprudential Supervision of the Financial System Act was adopted in 2013, and governs the status, objectives, tasks, powers and functioning of the Financial Stability Board (FSB), and the approach to macroprudential supervision in Slovenia. It also sets out the tasks, powers, supervisory measures and instruments, and functioning of supervisory authorities in the area of macroprudential supervision. Banka Slovenije is one of the macroprudential supervisory authorities, and is also home to the secretariat of the FSB.
The purpose of macroprudential policy is to mitigate the effects of financial cycles and to increase the resilience of the financial system to disruptions. Macroprudential policy identifies, monitors and assesses systemic risks to financial stability, and adopts the requisite measures to prevent and mitigate systemic risks. The ultimate objective of macroprudential policy is to contribute to safeguarding the stability of the financial system as a whole, including strengthening the resilience of the financial system, and preventing and mitigating the build-up of systemic risks, thereby ensuring a viable and sustained contribution to economic growth from the financial sector.
The Strategic Framework for Macroprudential Policy puts in place a strategic framework at Banka Slovenije for using macroprudential instruments under its direct control to meet the intermediate objectives of macroprudential policy. Designing and setting the intermediate macroprudential policy objectives is the key, as this helps to make macroprudential policy more operational, more transparent and more accountable, and lays the foundation for selecting the instruments.
The macroprudential policy decision-making process takes place over a cycle of four stages:
identification and assessment of systemic risks,
selection and formulation (calibration) of macroprudential instruments,
implementation of macroprudential instruments,
evaluation of macroprudential policy and instruments.
The phases of the macroprudential policy cycle are closely connected in practice, and cannot be treated as separate.
The process by which macroprudential policy is implemented is partly set out in legislation at the national level and at EU level. Banka Slovenije has a mandate to attend to financial stability in Slovenia by pursuing macroprudential policy, which is set out by the Bank of Slovenia Act, the Banking Act and the Macroprudential Supervision of the Financial System Act.