This outcome could ensue were banks accounting for a material portion of credit extension simultaneously to come under solvency or funding pressures that caused them to pull back from lending. The importance of both macroprudential objectives is that the regulatory framework should aim to reduce the chances of transmission of systemic risk by such firms to a greater extent than traditional, microprudential regulation would.
The benefits of data harmonisation and standardisation are clear: it will help authorities better monitor risks and give the private sector the basis for a deeper understanding of the financial markets, sounder decision-making, and increased process efficiency for industry participants. A lot has been done, but a lot more remains to be done.