Primary policy instrument at the disposal of the FSC
Warnings and recommendations: The primary policy instrument at the disposal of the FSC
is its ability to issue warnings or ‘comply or explain’ recommendations to public sector
authorities. The German authorities emphasise that there should be no mechanistic threshold
or predetermined criteria to trigger such actions. Given the nature and diversity of factors that
could impinge on financial stability, a certain amount of flexibility and discretion in this area
is desirable.
At the same time, however, the FSC should be able to form a consistent view on
the conditions that would prompt the issuance of a warning or a recommendation. This would
necessitate the development of an analytical framework setting out the relevant
considerations (e.g. Materiality, issues to consider for taking action such as the effectiveness
and efficiency of the proposed tool, implementation and reporting processes etc.) to
determine the potential need for specific warnings and recommendations before a decision is
made. Preparatory work is already underway, drawing also on ESRB work on the application
of the countercyclical capital buffer in EU member states.
EU Forecast
euf:ba.18.j:58/nws-01