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Expanding the role of central banks in liquidity risk management and macroprudential supervision

Vol. 26, Iss. 1, JANUARY 2020

Received: 21 November 2019

Received in revised form: 5 December 2019

Accepted: 19 December 2019

Available online: 30 January 2020

Subject Heading: Banking

JEL Classification: R11, R12, R58

Pages: 168–178

https://doi.org/10.24891/fc.26.1.168

Ipat'ev I.R. Financial University under Government of Russian Federation, Moscow, Russian Federation
ivan.ipatyev@gmail.com

https://orcid.org/0000-0002-1792-7852

Subject Some experts point at the fact that that macroprudential regulation is missing in the current regulatory practice of central banks causing a gap between the regulation of private financial institutions and macroeconomic policies.
Objectives The study reflects the need to amplify the role of central banks in managing risks of macroprudential supervision and liquidity in order to bridge the existing gap between central banks and supervisory authorities when exercising their functions and supervisory roles, since this is important for understanding the activities of central banks in matters of market conditions and supervision of payment systems. I also analyze methodological aspects in studying the macroprudential policy, i.e. the growing significance of central banks, supervision of payment systems, role of central banks in liquidity risk management, reassignment of roles and duties among central banks and supervisory authorities in regulation and oversight, independence of central banks from political forces.
Methods I conducted the content analysis of available sources, comparative analysis of BCBS setting up requirements to credit institutions and evaluated macroprudential supervision models.
Results The article instructs how to bridge the gap between the regulation of some financial institutions and macroprudential policy by expanding the involvement of central banks in macroprudential oversight. Macroprudential factors should obviously be more thoroughly elaborated within the overall financial system.
Conclusions and Relevance Central banks should play a greater role in managing risks of macroprudential supervision and liquidity. To do so, supervisory authorities and central banks should cooperate more closely and effectively, rather than simply exchanging their knowledge and capabilities to create and align macroprudential activities.

Keywords: central bank, banking supervision, systemic risk, macroprudential regulation, financial stability

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