decision-making. Procedurally, the secretariat starts working on draft recommendations only after receiving a mandate from the SRC, which often follows a phase of consensus building within SRC meetings. This has led to delayed action in some cases. Second, limited powers of the SRC can also lead to inaction bias in cases where MIBFA does not comply with its recommendations. This has happened, particularly regarding risks related to deferred amortization loans in the household sector. To strengthen the framework, the SRC chair should be given the ability, enshrined in law
phase of consensus building within SRC meetings. 12 While there are merits to consensus building, in its extreme form implies that each member has an implicit veto power. The institutional arrangement should foster consensus building without letting it hold up decision-making. Delayed activation of CCyB and household sector tools despite signs of building vulnerabilities are two examples where consensus building may have limited action. Another reason for inaction bias is the limited powers of the SRC. The SRC does not have hard powers over macroprudential tools
, data availability and quality. The issuance and implementation phases seem to be working adequately. Once a recommendation by the SRC is made, the MIBFA has three months to comply or explain and there seems to be adequate transparency in the implementation phase. Text Figure 2. The Process for MaPP Implementation in Denmark 3. However, the consensus building phase seems to have taken too long in some cases . From published statements of the SRC meetings, it can be seen that observations mentioning “the build-up of systemic risk” started on September 2014
This Detailed Assessment of Observance report specifies Base Core Principles (BCP) for effective banking supervision in Australia. An assessment of the effectiveness of banking supervision requires a review of the legal framework, and a detailed examination of the policies and practices of the institution(s) responsible for banking regulation and supervision. In line with the BCP methodology, the assessment focused on banking supervision and regulation in Australia and did not cover the specificities of regulation and supervision of other financial institutions. The assessment has made use of five categories to determine compliance: compliant; largely compliant, materially noncompliant, noncompliant, and non-applicable. The report insists that Australian Prudential Regulation Authority (APRA) should put more focus on assessing the various components of firms’ Internal Capital Adequacy Assessment Process and other firm-wide stress testing practices. A periodic more comprehensive assessment of banks’ risk management and governance frameworks will further enhance APRA’s supervisory approach.