This is why the ESAs and national supervisors together with the central banks are members of the ESRB and why the ESRB and the ESAs form the European System of Financial Supervisors. The ESRB’s main tasks are threefold: to identify and prioritise systemic risks; to issue early warnings when significant systemic risks emerge; and to issue policy recommendations for remedial action in response to the risks it identifies. The ESRB will not focus on individual institutions, individual countries or individual macroeconomic issues – it will take a strong horizontal focus, across countries, across sectors and across the boundaries between the financial sphere and the real economy. Interlinkages and spillovers should be key terms in its analysis. To achieve these tasks, the ESRB is drawing on information from many sources, including strong analytical input from its members; intelligence gathered from financial system participants; and the data necessary to understand the nature of interlinkages that define the financial system. ESRB analysis must be broad-based covering potentially any aspect of the EU’s financial system – markets, institutions and infrastructure. The ESRB is being established at a time when the concerns of markets and policy-makers about short-term vulnerabilities seem to prevail over perceptions of medium- and longer-term risks. This confronts the ESRB, as well as other macroprudential bodies around the world, with specific challenges. The ESRB needs to consider what activities to initiate, well before a fully-fledged macroprudential policy framework is developed in the medium term.
Policy changes are assumed to be for a period of 3 years and the effect on GDP is the average fall over that period. Without reciprocity, the CCyB does not increase resilience for 11% of domestic credit assumed to be provided by foreign banks. In addition, one-third of any policy-induced fall in domestic credit is offset by higher credit growth from foreign banks. Charts 4 and 5: International marketable debt flows have increased more quickly than cross-border bank flows Advanced Economies  Emerging Economies  Notes: Pink lines show cross-border loans and deposits from all BIS-reporting banking systems to residents in advanced or emerging economies. The blue lines show amounts outstanding of international debt securities. For advanced economies, the blue line counts issuance outside the market where the borrower resides, and in the case of emerging economies the blue line counts issuance outside the market where the parent company resides. Sources: Hoggarth et al (forthcoming), IMF World Economic Outlook, BIS International Banking and Debt Securities and Bank of England calculations. Chart 6: Portfolios flows to emerging markets have been as volatile as bank flows  Note: The charts show the cross-country median of the standard deviation of gross capital inflows (as a % of GDP) divided by the average size of capital flows. Sources: Hoggarth et al (forthcoming), IMF International Financial Statistics and IMF World Economic Outlook (for GDP data).