OREANDA-NEWS. November 18, 2015. Speaking in advance of the Central Bank workshop ‘Banking, credit and macro-prudential policy:  what can we learn from micro-data?’ conference in Dublin Stefan Gerlach, Deputy Governor, with responsibility for Central Banking, said that macro-prudential instruments must build system-wide resilience by addressing the links between financial institutions and the markets, as well as their common exposure to economic risk factors.

'The Central Bank of Ireland has a financial stability mandate and introduced macro-prudential policy measures in January of this year to enhance the resilience of the financial system and to reduce the risk of bank credit and house price spirals from developing. The very limited evidence we have so far indicates that the measures are functioning as intended. The public discussion of the measures has highlighted a number of problems which exist in the Irish housing market, in particular in relation to supply constraints. Macro-prudential policy cannot solve these problems and they certainly cannot be resolved by risky lending: they can only be resolved by housing policy,' he said.

There has been a steady increase in the volume of research which deals with measuring and testing the impact of macro-prudential policies. However, Deputy Governor Gerlach said episodes of financial instability are very difficult to predict and macro-prudential tools need to be permanent features of the financial landscape and to be assessed from time to time.

'Research is important and indeed necessary to allow us to conduct a careful assessment of the broader effects the rules have on the economy. As yet, it is still too early to do so. Gaining insight from micro data is important in policy formation as many aspects of macro-prudential regulation may require a calibration that is tailored to specific groups or sectors of the economy.'