Resilience of the financial system with regard to systemic stress thus requires buffers which take these externalities into account. Experience with macro-prudential policies is limited though, which requires a continuous monitoring of the progress that has been made.
The consultation process that has been launched by the European Commission on the macro-prudential framework is a key element of monitoring the effectiveness and efficiency of macro-prudential institutions. Effective macro-prudential policies are particularly needed at the European level, given the close real and financial linkages between member countries of the European Union (EU). Effective macro-prudential policies require an institutional set-up with three key characteristics.