Indeed, huge risks may emerge from the complex interactions between the individual players and instruments, the institutional framework and the broader macroeconomic environment. Detecting this type of underlying vulnerability requires a “top-down” approach to complement the “bottom-up” supervision of the financial system’s individual components. This is the focus of “macro-prudential supervision” as it is known.
The high rate of tobacco inflation reflects the introduction of a new indexation regime in December 2013, which was to see the tobacco excise increase by 12.5 per cent per year above average earnings.