Opinion to the European Commission on structural macroprudential buffers : December 2017

The ESRB welcomes the European Commission's intention from 2016 of reviewing the existing macroprudential framework and stresses that the proposed removal of Pillar 2 from the macroprudential framework needs to be balanced by enhancing flexibility in other macroprudential instruments. The ESRB highlighted its priorities in its response to the Commission Consultation Paper on the Review of the Macro-prudential framework, published on 24 October 2016. The ESRB agrees with the European Commission's view that - based on the experience gathered over the last couple of years - both the institutional set-up and the existing macroprudential toolkit require some targeted adaptations in order to improve the effectiveness of macroprudential measures. The ESRB is mindful of the Commission's legislative proposals currently under negotiation and of its short-term priorities regarding the review of the macroprudential framework. Against this background, this opinion, while not explicitly discussing the Commission's proposal, tries to contribute to the ongoing discussion on how the removal of Pillar 2 from the macroprudential toolkit could be balanced with additional flexibility with respect to the use of structural buffers. Nevertheless, additional changes beyond the area of structural buffers may also be warranted to sufficiently compensate for the loss in flexibility that the removal of Pillar 2 from the macroprudential toolkit would cause. Building on the initial ESRB response, this opinion identifies a series of interlinked detailed proposals for changes to the legislative framework with respect to macroprudential structural buffers. Following the conclusions of the ESRB response of October 2016, this opinion provides further analysis and economic reasoning for proposed changes with respect to macroprudential structural buffers and, where possible, identifies specific proposals for legislative changes. This opinion represents the majority views of the General Board's voting members; individual ESRB members may have different views. However, the ESRB advocates that the proposals need to be considered as a package of mutually reinforcing measures.