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The 2007–09 financial crisis appeared to demonstrate the need for a strong, supranational EU macro‐prudential policy framework to prevent similar future disasters. The implemented framework, however, is neither. It is highly complex, involving many constraints on the use of macro‐prudential instruments. It is also one of the principal areas of nati...
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... For that reason, among others already examined by the literature (Lombardi and Moschella 2017;Stellinga 2021;Thiemann 2019), MP governance provides bounded pockets of autonomy that spread across several dimensions. In principle, these avenues may enable more vulnerable countries to navigate the pursuit of financial stability while reducing the distributional impact of it. ...
... The diagram illustrates the multi-function dimensions of MP policy. As argued by recent scholarship (Stellinga 2021;Thiemann 2019), the framework strives to be consistent to its natural posture, namely counter-cyclical action, because the three dimensions ideally require to set up an entirely new institutional setting. Instead, the current MP framework is built on the attempt to re-purpose existing institutions. ...
Financial stability can be understood as a public good essentially provided at the national level producing benefits that are reaped beyond the national borders. In principle, systemic risk should be contained (almost simultaneously) everywhere or all countries will eventually pay the cost of the resulting financial instability. However, there are reasons to argue that the macroprudential (MP) framework potentially jeopardizes the chances for an equal distribution of the costs for the provision of financial stability. This assumption is upheld by the existence of cross-border spillovers which are partly channelled through bank ownership networks. Despite affecting potentially all Member States, cross-border spillovers are concentrated in specific areas within the EU. This project focuses on Central Eastern Europe (CEE) and, in particular, its Eurozone countries. The literature shows how these countries are already disadvantaged in the relative-power relationship within the Banking Union (BU), due to their position as "small host" in cross-border banking networks. When combined with the materiality of MP policy's spillovers, it is reasonable to expect the trade-off between credit growth and financial stability to be more dramatic for Eurozone small-host countries Therefore, it is puzzling that we do not see any major instance of conflict in the first decade of functioning of the macroprudential framework. This project sets out to identify crucial reasons for the maintainability of MP institutional setting.
... In this respect, it should be recalled that the banking regulation of the euro area experienced dramatic changes between 2012 and 2014. The main change was due to the implementation of the Banking Union, which is based on centralised supervision 6 and a partially centralised resolution mechanism incorporating a bail-in process (Enria et al. 2016;Micossi 2017) 7 ; another critical change was the approval of Basel III's new capital requirements and second pillar rules (Stellinga 2021). Moreover, in the following years, European financial markets were characterised by the growing importance of non-banking credit suppliers and corporate bonds. ...
Differently from previous crises, the European institutions responded promptly to the Covid-19 pandemic by implementing an appropriate policy mix. However, this policy mix has proven to be insufficient for reducing the risks of financial instability in the European Union due to the temporary horizon of the centralised fiscal policy and the persistence of adverse shocks. In fact, the impact of the pandemic was exacerbated by the dramatic consequences of the war in Ukraine. The possible inefficiencies in implementing the Next Generation-EU (NG-EU) and an inadequate response to the Ukraine crisis could trigger, at best, the revival of financial and fiscal dominance in the euro-area economies. However, by using a simple model referred to the post-pandemic and war period, we show that the overburdening of the European Central Bank’s role would come with high costs. Hence, we argue that it is necessary to pursue sustainable development based on the successful implementation of the NG-EU and the related transformation of the one-shot centralised fiscal policy into a recurrent policy tool.
... This has hampered the evolution of an EU-wide macroprudential policy framework since the use of macroprudential instruments has been constrained by procedural requirements and limits on their intensity and scope. While national authorities must justify discretionary regulatory actions to the EU, it is hard to do so in the absence of agreed norms for measuring and mitigating systemic risk (Stellinga (2021)). ...
... The ECB has made clear, however, that it does not take financial stability considerations into account in its monetary policies (including Quantitative Easing). Despite this EU dimension, macroprudential competences -particularly those linked to real-estate -are mostly located at the national level, reflecting their political sensitivity (Stellinga, 2021). ...
... This literature, however, has mostly studied political dynamics shaping macroprudential reforms in general, rather than related to housing. While IPE-scholars have emphasized these measures' political sensitivity due to their impact on mortgage credit conditions (Fuller, 2019;Kohl, 2021;Stellinga, 2021), we know little about how this has shaped the institutional design of countries' macroprudential frameworks, let alone how this has affected their actual functioning (Thiemann and Stellinga, 2022). Overview studies show that countries differ in the distribution of macroprudential responsibilities between ministries and financial supervisors, particularly with respect to housing issues (Edge & Liang, 2019, pp. ...
The 2007-2009 financial crisis exposed the risks of housing finan-cialization. Yet the political dynamics shaping post-crisis efforts to de-financialize housing have received surprisingly little analysis. The financialization literature posits that de-financialization policies have been hampered by a policy consensus on the desirability of the pre-crisis status quo. I examine this claim through a detailed analysis of Dutch macroprudential policy reforms, which aimed to mitigate housing-related systemic risks. It finds a fragmented rather than coherent policy community, with the central bank and financial conduct authority pushing for ambitious policies. While they influenced reforms during the housing bust (2008-2013), the government ensured that these financial supervisors would remain peripheral to the future determination of these policies. As the subsequent housing market recovery reduced the urgency to reform, supervisors were unable to impose further de-financialization policies. Housing financialization thus appears self-sustaining, by making mortgage-related policies politically too important for the government to consider a significant empowerment of the actors that might challenge it.
... Macroprudential policy's political dimension has also featured prominently in scholarly analyses (Baker, 2018;Belfrage & Kallifatides, 2018;Helleiner, 2014;Stellinga, 2021). Countercyclical actions aimed at constraining credit growth-particularly mortgage credit-may be unpopular among a part of the electorate and lobby groups. ...
Implementing precautionary measures that have obvious distributional consequences today but often only invisible future benefits is politically difficult. It requires that policymakers reconcile technocratic expertise with political consent. This paper traces attempts to enact such measures, focusing on countercyclical policies to limit the systemic risks of housing booms as proposed by financial stability committees in Germany, France, and the Netherlands from 2015 onwards. These committees bring together technocrats and political authorities in order to overcome the inaction bias inherent to these measures, seeking to forge both epistemic and political consensus on the need for action. We find that the work of these committees is characterized by lengthy processes of consensus‐building, during which technocrats amass evidence and search for politically acceptable solutions. We argue that whether this leads to meaningful steps crucially depends on the committee's institutional set‐up. What particularly matters is its capacity to engage the Ministry of Finance in binding discussions and the governance arrangements for the activation of precautionary instruments, which shape whether a shared framing of the problem and appropriate response emerges.
... Sinds 2013 had DNB immers beschikking over de macroprudentiële instrumenten voor banken die uit Europese beleidskaders voortvloeiden (de Richtlijn en Verordening Kapitaalvereisten; CRD IV). Het gaat hier onder andere om strengere regels voor systeembanken, de contracyclische kapitaalbuffer en om extra kapitaaleisen voor hypotheekuitzettingen (Stellinga, 2021). ...
De stijgende huizenprijzen kunnen een risico vormen voor het financiële en macro-economische systeem. Er is echter niemand die beleidsmatig de verantwoordelijkheid neemt voor de stabiliteit van de huizenmarkt. De potentieel krachtigste instrumenten – de limieten aan hoeveel mensen kunnen lenen – blijven buiten het bereik van de toezichthouders, en worden door de politiek vooral gezien als consumentenbescherming.
In the fallout of the 2008 crisis, macroprudential policy has been installed as the policy remedy against future financial instability, a primary focus being developments in the real estate sector. With house prices consistently rising in the EU since 2014, causing alarm among macroprudential supervisory bodies, a core question of EU regulatory governance is how far macroprudential bodies have been capable of bringing about countercyclical actions against the build‐up of such vulnerabilities. This paper investigates this question using a novel dataset of macroprudential intensity coded for the 17 EU countries that experienced real estate vulnerabilities post‐euro crisis. Specifically, it asks which configuration of conditions account for the (in)capacity of countries to impose stringent countercyclical regulations against housing booms? Using fuzzy set qualitative comparative analysis technics coupled with qualitative analysis of country cases using expert interviews, we find that the absence of political salience of homeownership and the political independence of macroprudential authorities to be crucial conditions that jointly explain countercyclical macroprudential activity. These findings, which show two pathways to action have implications for the capacity of the EU to prevent future crises and future reform of the EU prudential framework.
At the beginning of the present century, the literature on financial integration focused on the benefits of increased integration. In particular, the literature emphasized that a well-integrated financial system allows economic agents to engage in risk sharing while enhancing the smooth transmission of monetary policy. However, the international financial crisis of 2007-08 and the euro area sovereign debt crisis of 2009-15, brought to the fore the flip side of increased financial integration – namely, that higher financial integration among national jurisdictions creates the potential for destabilizing cross-country spillovers of capital flows. The papers in this Special Issue address financial system vulnerabilities in the aftermath of the 2007-08 financial crisis and the 2009-15 euro area crisis. In particular, the papers assess (1) vulnerabilities arising from such factors as the liberalization of financial systems, cross-country contagion, and climate change, and (2) policy responses, including macroprudential supervision and quantitative easing, to financial instabilities.
In this book we identify two key challenges: we need a more balanced and controlled growth of money and debt as well as a better balance between public and private interests. This chapter focuses on the policy steps that can be taken to bring this about. We discuss measures taken since the crisis as well as measures that have been proposed but were not implemented.
