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Piergiorgio Alessandri

Piergiorgio Alessandri is research fellow at Bank of Italy. He previously worked as a Senior Economist at Bank of England. He has been visiting scholar at Norges Bank.

The Coordination of Micro and Macro-Prudential Supervision in Europe

March 2, 2016 by Piergiorgio Alessandri and Fabio Panetta

With the creation of the Banking Union and the launch of a new macroprudential policy framework, banking supervision in Europe has become significantly more complex than it used to be. The coexistence of micro- and macro-prudential regimes that rely on similar tools to pursue different objectives may at times give place to conflicting policy interventions. This risk is structurally higher in bank-based economies with highly concentrated banking sectors. It may be further heightened in the contractionary phase of the cycle, when policymakers face a short-run trade-off between the resilience of the financial sector and the speed of the recovery. Coordination is thus a critical issue today in the euro area. In order to deal with it, supervisors need to agree on a ranking between their policy objectives, internalise the interactions between micro and macroprudential tools, and consider the general equilibrium effects of their interventions on the economy of the area.

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European Economy
Banks, Regulation, and the Real Sector

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