This is achieved with reference to Basel III principles that focus heavily on mitigating systemic risk and strengthening banks’ resilience, particularly the ability of systemic banks to bail itself. The basic concept of macroprudential policy and systemic risk 5. The next question is then what is systemic risk? What is macroprudential policy?
Macroprudential policy has been well defined in the IMF, BIS and FSB’s documents, as well as published papers. There are at least 3 (three) key elements to describe macroprudential policy. First, it aims to safeguard financial system stability. Second, the focus is on systemwide perspectives instead of individual financial institution’s safety and soundness level.