Thus, while each policy must act on the basis of its individual objectives, the consequences each has for the other should be taken into account. Macroprudential policy in practice identification and monitoring of systemic risk Timely activation of macroprudential tools calls for indicators that enable the risks arising in the financial system to be monitored and which, in parallel, allow the use of the instruments and their effects to be calibrated. 12  In particular, these indicators should be capable of capturing the financial cycle. The literature has identified various indicators that can play this role. For example, Terrones et al. (2011) consider three main variables on the basis of which these indicators can be calculated: credit to the non-financial private sector, house prices and stock market prices. Thus, in the case of the CCyB, current regulations give a special role to the credit-to-GDP gap (also known as the “Basel gap”). This indicator measures the difference between financing received by the non-financial private sector as a percentage of GDP and its longrun equilibrium trend, estimated using statistical procedures. Positive credit-to-GDP gap values would indicate that we are in the expansionary phase of the financial cycle, since the volume of credit, once the economy’s level of income is taken into account, stands above its equilibrium level. Consequently, activating the CCyB or increasing it might be considered. Negative values would denote a contractionary phase in the financial cycle, whereby the CCyB should be deactivated under normal conditions.
You really didn’t think that meeting people from BNP Paribas on the very same day that the Governing Council took a major monetary policy decision would arouse suspicions about your independence? Do you really think there’s a risk there? Our independence towards banks is well known. The person in question was passing through Frankfurt that day and I can assure you that we didn’t discuss monetary policy. To be clear: in such meetings we never divulge sensitive information or indications about the future direction of monetary policy. That is against our rules. Publishing your meeting calendars may not be enough. Why not implement a “quiet period” like the Bank of England, during which no meetings are allowed? If we need to tighten our rules because the public has a negative perception of how we conduct ourselves, then we will tighten them. Central banks are public institutions and people’s perception of what we do is important. But we’re not going to stop talking to the market. Communicating with market players is a key part of monetary policy, and is all the more important given that the ECB is implementing new, unconventional monetary policy instruments. The financial markets seem to think that the ECB will boost its very accommodative monetary policy of purchasing assets, or “quantitative easing”, from December… Are they right? The decision has not been taken. The debate is ongoing.