Systemic Risk and Macro-Prudential Regulation

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Systemic Risk and Macro-Prudential Regulation

AFME’s Prudential Regulation Division considers both existing and prospective drivers and forms of systemic risk and maintains a specialist working group to consider macroprudential policy which is designed to increase the resilience of the financial system through the identification, monitoring and mitigation of systemic risks.


Systemic risk can develop rapidly, it is often unpredictable, dynamic and evolving. It involves multiple parts of the financial system and its crystallisation usually takes different forms with far reaching and sometimes global consequences.

The causes of the global financial crisis of 2007-2008 are often attributed to global macro-economic imbalances which led to rapid growth in global liquidity and falls in real risk-free interest rates in many economies. Prior to the crisis there had been little attempt by major economies to regulate the volume of credit as it expanded and drove economic growth to unsustainable levels, including the over-inflation of prices in some asset classes. One of the most significant agreed policy responses to the crisis was a commitment from policymakers to reform regulation to reduce procyclicality and to implement counter-cyclical macroprudential supervision. The recent Covid-19 pandemic has also highlighted the necessity of a comprehensive set of policies to address large and disruptive shocks to the financial system.

Financial Stability



AFME engages in debates concerning the levels of non-performing loans (NPLs) in Europe. We have made a number of policy submissions on prudential topics, insolvency reform, and on measures to develop deeper European secondary markets for NPLs and distressed debt.
View the NPLs site.

Macroprudential Policy



Macroprudential policy is designed to increase the resilience of the financial system through the identification, monitoring and mitigation of systemic risks with the aim of preventing the crystallisation of these risks from causing instability in the financial sector. Macroprudential policy therefore provides a mechanism to counterbalance risks that cannot be addressed adequately through microprudential supervision or monetary policy and to deal with risks form the potential unintended effects of monetary policy.

EC Consultation on improving the EU’s macroprudential framework for the
banking sector

Working Group: Macroprudential Working Group.


Mark Bearman

Director, Capital & Risk Management