The Process of Macroprudential Oversight in Europe

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The 2007–2008 financial crisis has paved the way for the use of macroprudential policies in supervising the financial system as a whole. This article views macroprudential oversight in Europe as a process, a sequence of activities with the ultimate aim of safeguarding financial stability. To conceptualize a process in this context, we introduce the notion of a public collaborative process (PCP). PCPs involve multiple organizations with a common objective, where a number of dispersed organizations cooperate under various unstructured forms and take a collaborative approach to reaching the final goal. We argue that PCPs can and should essentially be managed using the tools and practices common for business processes. To this end, we conduct an assessment of process readiness for macroprudential oversight in Europe. Based upon interviews with key European policy makers and supervisors, we provide an analysis model to assess the maturity of five process enablers for macroprudential oversight. With the results of our analysis, we give clear recommendations on the areas that need further attention when macroprudential oversight is being developed, in addition to providing a general purpose framework for monitoring the impact of improvement efforts.

Policy Implications

  • Macroprudential oversight is a public collaborative process (PCP). PCPs can and should be managed with the same means as business processes, since they contain the same elements. The basic function of any process is to transform inputs to outputs with the ultimate goal of serving customers.
  • While containing the same elements, there are key differences between business processes and PCPs, specifically in how processes are adapted to serve customers related to indirect and complex feedback loops. Complexity derives from the fact that PCPs serve the population in its entirety. Further, the feedback loop between the provider and the customer differs substantially, as it is regulated through an oftentimes democratic system, with politicians serving as the representative of the customer.
  • Concerning macroprudential oversight in Europe, we observe in this study that ‘process design’ and ‘process metrics’ exhibit the lowest levels of readiness. There seems to be an agreement with regard to the challenges in this area. The ‘process performers’ enabler exhibits a relatively high level of readiness but with some disagreement in comparison to design. Analytics to steer process metrics, as well as the ‘process infrastructure’ and ‘process ownership’ enablers, exhibit an average level of readiness, but with larger dissensus. Despite agreement on the existence of a process owner, the lack of consensus on the ownership is especially alarming.
  • We have provided a general purpose framework for assessing process readiness. The framework lends itself to regular updates of the assessment of process readiness, enabling monitoring the impact of improvement efforts over time. Likewise, this framework is far from bound to the region under analysis in this paper, such as assessments of the state of macroprudential oversight in the US and UK.
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