In the financial year 2012–13, growth had slowed to its lowest level since 2003–04 at 4.5 per cent, current account deficit (CAD) had expanded to its highest level at 4.7 per cent of GDP, gross fiscal deficit of the central government was 4.9 per cent of GDP and consumer price inflation remained in double digits. Hence, macroeconomic conditions were weak.
It is therefore the task of macro-prudential policies to deal with potential financial imbalances. The supervisory set-up in Europe has undergone significant improvements that will help to ensure the soundness of the financial system.