Work is now underway in various international forums to develop a toolbox for macroprudential policy. So far, however, relatively few specialised macroprudential-policy tools have emerged. The tool that is probably attracting most attention at the moment consists of the countercyclical capital buffers that have been adopted within the framework of the Basel III Accord. The aims of these buffers are to make the banks more resilient and to dampen the cycles in credit growth and asset prices. The idea is that the authorities should force the banks to hold extra capital in good times, when lending is beginning to increase too quickly, in order to be able to reduce capital requirements later when times are not so good. This will make it more expensive for the banks to build up risks in good times at the same time as buffers are created that the banks can use in bad times when the risks materialise. However, this thus means that there must be a national authority that can decide when the countercyclical buffers should be turned on and off. The tools that can be characterised as “specialised” macroprudential-policy tools also include capital requirement surcharges for systemically-important financial institutions. Apart from this, most of the tools that can be considered for macroprudential policy are those that in one way or another are already included in financial supervision’s toolbox. These include, for example, the so-called mortgage cap, although this is usually justified in terms of consumer protection.
On the other hand, a tighter hold on the reins during the good years preceding the crisis would have increased resilience and provided more room for manoeuvre to manage the crisis when it did occur. It would then have been possible to manage the crisis within a couple of years and we wouldn’t still have to be dealing with it today. My conclusion is that well-balanced monetary and fiscal policies offer the best possible chances of preventing financial crises, but essentially other measures are needed. We need tools that are specially designed for working with the stability of the financial system. Macroprudential policy – a new policy area Traditionally, financial supervision has had a rather one-sided focus on the health of individual financial institutions. In practice this has also been the case in Sweden, although formally Finansinspektionen has the task of working for a stable and efficient financial system alongside its consumer-protection tasks. However, the fact that individual parts of the financial system appear to be healthy does not mean that they are immune to contagion from other parts of the system. The institutions have exposures to one another and it is sometimes unclear who is exposed to what risks. When an individual institution experiences problems, this may then have serious repercussions for the financial system and, ultimately, the real economy. However, traditional supervision has not sufficiently taken into account the risk of financial problems becoming contagious. Monitoring those risks is also a rather different process to monitoring the risks in an individual institution.