An adequate appreciation of these dynamics requires a systemic perspective for the analysis of financial stability which normally lies with the central banks, but requires also a close interaction between them and prudential supervisors. Central banks can make an important contribution to financial stability by performing several tasks that can strengthen the “macroprudential supervision” of the financial system.
The precise content of the term is not always clearly and precisely defined. In general terms, macroprudential supervision – rather than concentrating on the health and performance of individual financial institutions – aims to limit system-wide distress by calibrating prudential controls accordingly.