Question

Macroprudential supervision policies try to prevent a leverage cycle by changing capital requirements so that they ________ during an expansion and ________ during a downturn.

Answer 1

Answer:

Macroprudential supervision policies try to prevent a leverage cycle by changing capital requirements so that they increase during an expansion and decrease during a downturn.

The goal of Macroprudential supervision is to identify risks that might hinder financial stability. A financially stable economic growth and stable pricing can only take place if there is reliable and stable financial system is in place that can be trusted.

There are two pillars of Microprudential supervision;

1. Prudential Regulation
2. Financial Conduct