| Abstract: |
Over the recent years, it has increasingly been acknowledged that macro
prudential policies are not only considered to be “a missing ingredient from
the current policy framework”, but that there has also been “too huge a gap
between macro economic policy and the regulation of individual financial
institutions.” The link between monetary policy and macro prudential policies,
the knowledge of central banks in matters relating to information on market
conditions and their oversight of payment systems, as well as the need to
bridge the existing gap between supervisory authorities and central banks
whilst executing their supervisory roles and functions, have necessitated an
extension of central banks role in the management of liquidity risks and macro
prudential supervision. A fundamental aim of this paper is to address how an
extension of central banks’ roles in macro prudential supervision can assist
regulators and supervisors in bridging the afore mentioned gap between macro
economic policy and the regulation of individual financial institutions. In so
doing, the need for greater focus on macro prudential factors, namely, the
system as a whole, as opposed to mere focus on the supervision of individual
institutions will be highlighted. The expertise and knowledge with which a
central bank is endowed in its role as overseer of the entire payments system
– as well as the quality of information which it has access to, are some of
those factors which add weight to its ability to bridge “the gap”. |