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Introductory statement

It gives me great pleasure to present our latest thoughts on macroprudential policy in the new issue of the Macroprudential Bulletin. The Macroprudential Bulletin provides insight into our ongoing work in the field of macroprudential policy, thereby contributing to greater transparency and fostering broader discussion on key macroprudential issues. This issue focuses on four areas in particular.

The first article investigates whether the euro area banking system is more resilient ten years after the global financial crisis. Over the past decade a series of reforms have taken place to make the financial system safer and more stable. Analysis shows that, thanks to the regulatory efforts, the ability of the banking system to absorb losses, while minimising the cost to taxpayers, increased between 3.5 and 12-fold between 2007 and 2017, depending on the assumptions on the scope of the bail-in tool. This has been achieved through higher regulatory capital and the new resolution framework, which includes the bail-in tool and the potential intervention of the Single Resolution Fund, as well as a significant reduction in the average probability of default of banks. Notwithstanding the significant increase in the average level of resilience in the euro area banking system, the post-crisis regulatory work is not yet complete. Recent and outstanding regulatory reforms, in particular the finalisation of the Basel III package and the MREL requirements, should be properly implemented to further strengthen the resilience of banks, especially outlier institutions.

The second article reports the results of a macroprudential stress-test that finds that the euro area banking system would be resilient to a deep simultaneous recession in global economies combined with large falls in asset prices in 2018-2020. With an 8% reduction in euro area GDP, banks would face cumulative losses amounting to 3.6 percentage points of 2017 CET1, but only 26% of significant euro area banks fall short of their combined buffer requirement. The macroprudential stress test incorporates banks’ dynamic responses to the stress (as compared to the static balance sheet approach of the EBA stress tests) and shows how banks’ deleveraging could lead to further deterioration in economic conditions in an adverse scenario. The inclusion of an additional feedback mechanism reveals considerable amplification resulting in a 1.6% deeper contraction in euro area GDP.

The third article focuses on financial stability risks stemming from the residential real estate (RRE) market. The last global financial crisis in particular showed that the RRE market is closely linked to the financial sector and to the overall economy. The identification and monitoring of RRE market risks to financial stability and the design of policy responses are a priority for national macroprudential authorities and for the ECB. As a result, the ECB has established a framework to identify vulnerabilities in RRE markets and to assess the use of appropriate macroprudential policy tools. The application of this framework to RRE markets in euro area countries indicates that vulnerabilities are emerging across the euro area and that further proactive policy actions may be warranted in some countries.

The fourth article presents a review of the strategic choices regarding the timing and calibration of the countercyclical capital buffer (CCyB) in the euro area, finding commonalities as well as country specificities. The article sheds light on the causes of these different policy choices. It also exposes limitations encountered in the prominent role of the credit-to-GDP gap in the current Basel framework.

As in previous issues, this Macroprudential Bulletin also provides an overview of macroprudential policy measures that are currently applicable in euro area countries.

Finally, transparency about our ongoing work is not an end in itself. It is also an opportunity for an exchange of views. I would therefore like to invite you to share your views with us by sending an email with your feedback to The same address can also be used if you want to receive notifications of future issues of the Macroprudential Bulletin.

Luis de Guindos
Vice-President of the European Central Bank