This note provides guidance to facilitate the staff’s advice on macroprudential policy in Fund surveillance. It elaborates on the principles set out in the “Key Aspects of Macroprudential Policy,” taking into account the work of international standard setters as well as the evolving country experience with macroprudential policy. The main note is accompanied by supplements offering Detailed Guidance on Instruments and Considerations for Low Income Countries

This note covers considerations that can guide the staff’s policy advice on the use of a broad range of macroprudential tools. It discusses the transmission and likely effectiveness of these tools in mitigating systemic risks and the set of indicators that can be used in surveillance to assess the need for changes in macroprudential policy settings. This note is a supplement to the Staff Guidance Note on Macroprudential Policy.

Staff Discussion Notes showcase the latest policy-related analysis and research being developed by individual IMF staff and are published to elicit comment and to further debate. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience interested in economic policy issues. This Web-only series replaced Staff Position Notes in January 2011.

The countercyclical capital buffer (CCB) was proposed by the Basel committee to increase the resilience of the banking sector to negative shocks. The interactions between banking sector losses and the real economy highlight the importance of building a capital buffer in periods when systemic risks are rising. Basel III introduces a framework for a time-varying capital buffer on top of the minimum capital requirement and another time-invariant buffer (the conservation buffer). The CCB aims to make banks more resilient against imbalances in credit markets and thereby enhance medium-term prospects of the economy—in good times when system-wide risks are growing, the regulators could impose the CCB which would help the banks to withstand losses in bad times.

MCM conducted a survey in December 2010 to take stock of international experiences with financial stability and the evolving macroprudential policy framework. The survey was designed to seek information in three broad areas: the institutional setup for macroprudential policy, the analytical approach to systemic risk monitoring, and the macroprudential policy toolkit. The survey was sent to 63 countries and the European Central Bank (ECB), including all countries in the G-20 and those subject to mandatory Financial Sector Assessment Programs (FSAPs). The target list is designed to cover a broad range of jurisdictions in all regions, but more weight is given to economies that are systemically important (see Annex for details). The response rate is 80 percent. This note provides a summary of the survey’s main findings.

This note explores how characteristics of financial systems commonly observed in low income countries may shape the approach to the staff’s advice on macroprudential policy. It explores the implications of the ongoing process of financial and institutional development for the conduct of macroprudential policy in these countries. This note is a supplement to the Staff Guidance Note on Macroprudential Policy.

Macroprudential policy in Europe aligns with the objective of limiting systemic risk, namely the risk of widespread disruption to the provision of financial services that is caused by an impairment of all or parts of the financial system and that can cause serious negative consequences for the real economy.