Financial stability is a global public good characterised by non-rivalry and non-excludability. This public good cannot be provided exclusively by the market, the central bank and other public institutions playing an important part in ensuring financial stability. Moreover, considering Romania’s status as an open economy, a cross-border approach by means of coordinating the related policies is required in order to achieve financial stability at national level.
NBR's role in maintaining financial stability
The National Bank of Romania has an intrinsic role in maintaining financial stability, given its responsibilities arising from its double capacity as monetary and prudential authority. Financial stability objectives are pursued both by way of its prudential regulatory and supervisory functions exerted on the institutions under its authority, and by the design and efficient transmission of monetary policy measures, as well as by overseeing the smooth functioning of the systemically important payment and settlement systems. In addition, it is necessary to identify risks and vulnerabilities in the financial system as a whole and its component parts, as the financial stability monitoring has a preventive scope. The occurrence and development of dysfunctions, such as the inappropriate risk assessment and the inefficient capital allocation are likely to affect the financial stability and the economic stability.
Co-operation in the financial stability area
The co-operation between the National Bank of Romania (NBR), the Financial Supervisory Authority (FSA) and the Government has intensified gradually, as the Romanian financial system has overall become more dynamic and complex, thus establishing institutional interlinkages. Specifically, it became necessary for the national authorities to cooperate in order to ensure the transparency and integrity of the financial system as a whole and of its component parts, as well as to comply with and consolidate the legal framework applicable in the field of financial stability.
At international level, increased focus was placed on the concept of financial stability as well as on the need of close worldwide cooperation in the field of financial stability, as a result of the significant global financial crisis effects and the transmission of risks across national financial systems (cross-border contagion effect). Hence, at EU level, the European Systemic Risk Board (ESRB) was established in 2010; the ESRB, together with other three European sectoral supervisory authorities, i.e. the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority, make up the European System of Financial Supervision. Unlike the European sectoral supervisory authorities, the ESRB focuses on identifying systemic risks and establishing the macroprudential policies EU-wide with a view to safeguarding the stability of the European financial system in its integrity. Where systemic risks are identified, the ESRB issues recommendations and warnings to Member States in order to mitigate such risks.
Having regard to Recommendation ESRB/2011/3 on the macro-prudential mandate of national authorities, in Romania, the National Committee for Macroprudential Oversight (NCMO) was established pursuant to Law No. 12/2017 on the macroprudential oversight of the national financial system. The National Bank of Romania, in its capacity as NCMO member, may put forward, during the NCMO General Board meetings, analyses and lines of action in the field of financial stability and macroprudential policy, according to its responsibilities. The warnings and recommendations issued by the NCMO aim to mitigate the risks and vulnerabilities identified in the national financial system and may be addressed to the NBR and the FSA, in their capacity as national financial supervisory authorities at a sectoral level. At the same time, the NCMO may issue recommendations addressed to the Government for the purpose of safeguarding financial stability.
The National Bank of Romania has continuously strengthened its cooperation relations in the field of financial stability and macroprudential policies with the European and international competent authorities, i.e. the European Central Bank, the European Systemic Risk Board, the European Banking Authority, the European Commission, etc., through the regular consultations held with regard to the implementation of macroprudential policies and through the participation of the central bank’s representatives in the regular meetings of the working groups set up by the European and international bodies.
Research, references and information related to financial stability
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