Macroprudential oversight in Germany
Germany’s lower house of parliament, the Bundestag, has vote on the Act to strengthen German financial supervision (Gesetz zur Stärkung der deutschen Finanzaufsicht) on 25 October 2012. It will become law on 1 January 2013.
The main focus of the draft Act is on strengthening cooperation between the Bundesbank, the Federal Financial Supervisory Authority (BaFin) and the Federal Ministry of Finance (BMF) in the sphere of financial stability. In addition, it aims to better synthesise microprudential and macroprudential oversight. To achieve this, the draft Act envisages the creation of a German Financial Stability Board (Ausschuss für Finanzstabilität), on which these three institutions will each have three representatives. The BMF’s involvement will ensure that, in the event of a crisis, all the relevant government bodies will be as well-informed as possible and will be able to respond accordingly. For the same reason, the Financial Market Stabilisation Agency (FMSA) will also have one representative on the board, albeit without voting rights. The Financial Stability Board will convene at least four times a year. At its meetings, board members will discuss, in particular, issues that are key to financial stability and will be able to issue warnings or recommendations. The board will report to the Bundestag once a year. It will also be tasked with giving advice to recipients of warnings or recommendations from the European Systemic Risk Board (ESRB).
The draft Act assigns the Bundesbank a prominent role, which includes responsibility for the ongoing analysis of issues that are key to financial stability and for identifying and assessing risks to financial stability (macroprudential oversight). Based on these ongoing activities, the Bundesbank will prepare the Financial Stability Board's meetings and draw up status reports as a starting point for the board’s discussions. If the Bundesbank identifies any threats to financial stability on the strength of its analyses, it will submit proposals to the board on how to avert or reduce such threats in the form of warnings or recommendations. These warnings and recommendations can be addressed to the German government, BaFin or any other public sector institution within Germany. Recommendations will outline suitable measures to avert the identified threat. Any entity receiving a recommendation will be obliged to inform the Financial Stability Board within an appropriate timeframe of how it means to implement the recommendation or why it does not intend to do so. The Bundesbank will monitor and evaluate the measures taken to implement the recommendation and forward its assessment to the Financial Stability Board. The quality of the Bundesbank’s analyses will largely depend on the data available to it. It will therefore be given comprehensive data access rights. To minimise the burden on the reporting entities, the Bundesbank must acquire existing data from other authorities. Any data which cannot be obtained in this way – say, because they have not yet been collected – may be accessed by the Bundesbank on the basis of a legal regulation which has yet to be enacted.