Macro-prudential policy bridges the gap between the traditional micro-prudential supervision of individual banks and monetary policy. Its objectives are, first, to enhance the resilience of financial institutions and the entire financial system, and, second, to smooth the financial cycle. In this regard, macro-prudential policy allows monetary policy to focus on maintaining price stability, while micro-prudential supervision focuses on individual institutions.
In this way, macro-prudential policy enhances the institutional separation that is one of the principles of the architecture of the euro area.