A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Remsperger, Hermann et al. Proceedings The ESRB at 1 SUERF Studies, No. 2012/4 Provided in Cooperation with: SUERF – The European Money and Finance Forum, Vienna Suggested Citation: Remsperger, Hermann et al. (2012) : The ESRB at 1, SUERF Studies, No. 2012/4, ISBN 978-3-902109-64-4, SUERF - The European Money and Finance Forum, Vienna This Version is available at: http://hdl.handle.net/10419/163503 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. 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Buch, Sandra Eickmeier and Esteban Prieto Abdul Abiad, Giovanni Dell’Ariccia and Bin Li Francesco Mazzaferro SUERF – The European Money and Finance Forum Vienna 2012 SUERF Study 2012/4 SUERF2012_4.book Page 4 Tuesday, January 8, 2013 11:06 AM CIP The ESRB at 1 Editors: Stefan Gerlach, Ernest Gnan and Jens Ulbrich Authors: Hermann Remsperger, Stephen G. Cecchetti, Stefan Ingves, Alberto Giovannini, Jens Weidmann, Alexandros Vardoulakis, Stefano Neri, Jürgen Stark, Előd Takáts and Christian Upper ,Claudia M. Buch, Sandra Eickmeier and Esteban Prieto, Abdul Abiad, Giovanni Dell’Ariccia and Bin Li, Francesco Mazzaferro Keywords: ESRB, systemic risk, financial reform, monetary policy, macroprudential policy, central banking, financial regulation, financial intermediation, microeconomic bank risk, deleveraging, creditless recoveries, credit crunch, credit cycles, financial crises, financial dependence JEL Codes: E32, E44, E5, E52, E58, F33, G21, G28 K20, K22 Vienna: SUERF (SUERF Studies: 2012/4) – December 2012 ISBN: 978-3-9021-0964-4 © 2012 SUERF, Vienna Copyright reserved. Subject to the exception provided for by law, no part of this publica- tion may be reproduced and/or published in print, by photocopying, on microfilm or in any other way without the written consent of the copyright holder(s); the same applies to whole or partial adaptations. The publisher retains the sole right to collect from third parties fees payable in respect of copying and/or take legal or other action for this purpose. SUERF2012_4.book Page 1 Tuesday, January 8, 2013 11:06 AM 1 TABLE OF CONTENTS List of Authors. 5 1. The ESRB at 1 – an Introduction. 7 Ernest Gnan, Stefan Gerlach and Jens Ulbrich 2. Opening Remarks . 23 Hermann Remsperger 3. Measuring Systemic Risk . 25 Stephen G. Cecchetti References . 31 4. Experiences with the ESRB – The View from within and Relation to Other Policy Areas. 33 Stefan Ingves 4.1. The Macro-prudential Framework . 33 4.2. Macro-prudential Objectives . 35 4.3. The ESRB’s Strategy to Tackle the Current Crisis . 36 4.4. Important ESRB Work on Macro-prudential Issues. 36 4.5. The ESRB – a Global Perspective. 38 4.6. How to Ensure a Successful ESRB . 38 5. Is there Progress in Financial Reform? . 41 Alberto Giovannini 5.1. Introduction . 41 5.2. What We Know. 41 5.3. Responses . 44 5.4. Discussion . 45 5.5. Concluding Observations . 47 6. Managing Macroprudential and Monetary Policy – a Challenge for Central Banks . 49 Jens Weidmann 6.1. Introduction . 49 6.2. Interrelations Between Financial Stability and Monetary Policy 50 6.3. How to Design Macroprudential Policy . 51 6.4. Challenges from the Sovereign Debt Crisis . 52 6.5. Conclusion . 55 larcier SUERF2012_4.book Page 2 Tuesday, January 8, 2013 11:06 AM 2 THE ESRB AT 1 7. Financial Regulation in General Equilibrium . 57 Alexandros Vardoulakis 7.1. Introduction . 57 7.2. Model Structure . 58 7.3. Default, Fire-sales and Amplification. 60 7.4. Financial Regulation . 62 7.5. Conclusions. 64 References . 64 8. Financial Intermediation and the Real Economy: Implications for Monetary and Macroprudential Policies . 67 Stefano Neri 8.1. Introduction . 67 8.2. The New-Keynesian Model and the 2007-08 Financial Crisis 67 8.3. A Critical View on Dynamic Stochastic General Equilibrium Models . 68 8.4. Monetary and Macroprudential Policies in a Model with Financial Intermediation . 69 8.5. Concluding Remarks . 73 References . 74 9. Macro-prudential Supervision and Financial Integration – the ESRB at 1 . 77 Jürgen Stark 10. Deleveraging and Recovery . 83 Előd Takáts and Christian Upper 10.1. Data . 87 10.2. Empirical Analysis. 88 10.3. Discussion and Caveats . 94 10.4. Conclusion . 96 10.5. Appendix: Additional Data Sources and Variable Definitions 97 References . 97 11. Macroeconomic Factors and Microeconomic Bank Risk . 101 Claudia M. Buch, Sandra Eickmeier and Esteban Prieto 11.1. The Issue . 101 11.2. Advantages of FAVAR Models . 101 11.3. Heterogeneity Across Banks . 102 11.4. Macroeconomic Shocks and Bank Risk Taking . 104 11.5. Implications for Banking Regulation . 108 larcier SUERF2012_4.book Page 3 Tuesday, January 8, 2013 11:06 AM TABLE OF CONTENTS 3 11.6. Implications for Stress Testing. 110 11.7. Avenues for Future Research . 110 References . 111 12. What Have We Learned about Creditless Recoveries? . 115 Abdul Abiad, Giovanni Dell’Ariccia and Grace Bin Li 12.1. Introduction . 115 12.2. Macro Perspective . 118 12.3. Sectoral Analysis . 123 12.4. Conclusion . 127 References . 128 13. Macro-prudential Instruments for Containing Systemic Risk: the ESRB View . 131 Francesco Mazzaferro 13.1. The Range of ESRB Tools . 132 13.2. ESRB Experiences During its First Year. 133 13.3. Instruments for Macro-prudential Purposes . 133 13.4. Conclusion . 134 The Institute for Monetary and Financial Stability . 135 SUERF – Société Universitaire Européenne de Recherches Financières . 137 SUERF Studies. 137 larcier SUERF2012_4.book Page 4 Tuesday, January 8, 2013 11:06 AM SUERF2012_4.book Page 5 Tuesday, January 8, 2013 11:06 AM 5 LIST OF AUTHORS Abdul ABIAD Deputy Division Chief in the Research Department of the International Monetary Fund in Washington DC Grace Bin LI Economist in the Research Department at the International Monetary Fund in Washington DC Claudia M. BUCH holds the chair for International Macroeconomics and Finance at the University of Tübingen and is Scientific Director of the Institute for Applied Economic Research (Institut für Angewandte Wirtschaftsforschung Tübingen) Stephen G. CECCHETTI Economic Adviser and the Head of the Monetary and Economic Department at the Bank for International Settlements in Basel, Switzerland Giovanni DELL'ARICCIA Advisor in the Research Department at the International Monetary Fund in Washington DC Sandra EICKMEIER Researcher at the Research Centre of the Deutsche Bundesbank in Frankfurt am Main Stefan GERLACH Deputy Governor (Central Banking) of the Central Bank of Ireland and previously Professor of Monetary Economics and Managing Director of the Institute for Monetary and Financial Stability at the University of Frankfurt. Alberto GIOVANNINI Partner, Unifortune Asset Managementy, Chairman, M.T.S. Ernest GNAN Head of the Economic Analysis Division at the Oesterreichische Nationalbank and Secretary General of SUERF Stefan INGVES Chairman of the Executive Board and Governor of the Riksbank. He also chairs the Advisory Technical Committee of the European Systemic Risk Board larcier SUERF2012_4.book Page 6 Tuesday, January 8, 2013 11:06 AM 6 THE ESRB AT 1 Francesco MAZZAFERRO Head of the Secretariat of the European Systemic Risk Board (ESRB) in Frankfurt am Main. Stefano NERI Deputy Head of the Monetary Analysis Division at the Banca d’Italia in Rome. Esteban PRIETO Researcher at the Chair for International Macroeconomics and Finance at the University of Tübingen Hermann REMSPERGER chairs the Supervisory Board of the "Stiftung Geld und Währung" and the Board of Trustees of the Institute for Monetary and Financial Stability at Goethe University, Frankfurt. Jürgen STARK Member of the Executive Board and the Governing Council of the European Central Bank (ECB) Előd TAKÁTS Senior Economist at the Bank for International Settlements covering emerging Europe and the wider CEMEA region Jens ULBRICH Head of the Economics Department of the Deutsche Bundesbank Christian UPPER Head of Financial Markets Unit at the Bank for International Settlements Alexandros VARDOULAKIS Economist in the Financial Stability Department