Is Macroprudential Policy Resilient to the Pandemic?

London Business School’s Professor Richard Portes is one of the authors of, 'Is Macroprudential policy resilient to the pandemic'? First aired during a conference of the same name by the Banque de France earlier this month, the aforementioned report was released on the occasion of the publication of the Banque de France’s Financial Stability Review (FSR). The associated conference brought together Governor François Villeroy de Galhau and Deputy Governor Sylvie Goulard, Luis de Guindos, Vice-President of the ECB, Gabriel Makhlouf, Governor of the Central Bank of Ireland, Claudia Buch, Vice-President of the Bundesbank, Richard Portes, Professor at the London Business School and member of the ESRB Scientific Board, Hyun Song Shin, Economic Advisor and Research Director at the BIS, Linda Goldberg, Senior Vice President at the Fed New York and Romain Paserot, IAIS Deputy General Secretary.

This 24th edition of the Banque de France's FSR draws initial lessons from the prudential responses to the Covid-19 pandemic. The conference recognised that the pandemic was not a crisis of the financial system, and banks have on the contrary provided some of the responses to fight the economic crisis. The FSR further states that the pandemic and its impact of the economy has nevertheless occurred in the context of financial vulnerabilities resulting from a vibrant financial cycle expansion and persistently low interest rates. It was observed that prevention of financial risks through an ambitious macroprudential policy is therefore even more necessary.

In particular, it is essential to (i) better address the international dimension of systemic financial risk, and more specifically to strengthen European macroprudential policy; (ii) develop a comprehensive macroprudential framework that covers the financial sector as a whole, beyond banks; (iii) better take account of the interactions between monetary and macroprudential policy on financial stability issues and enhance their coordination.

This 24th edition of the Banque de France’s Financial Stability Review is a special issue devoted to macroprudential policy in the midst of the Covid crisis. For a decade, we have been defining and implementing the macroprudential framework. While macroprudential policy is designed to address financial crises, it is also relevant in this economic crisis caused by the health crisis.


 
Details of FSR No. 24 is available on the Banque de France website: https://publications.banque-france.fr/en/liste-chronologique/financial-stability-review

François Villeroy de Galhau's introductory speech is also available on the Banque de France website: https://publications.banque-france.fr/en/financial-stability-review-no-24-march-2021