Microprudential regulation

Microprudential regulation or microprudential supervision is firm-level oversight or financial regulation by regulators of financial institutions, "ensuring the balance sheets of individual institutions are robust to shocks".[1]

Aims

The motivation for micro-prudential regulation is rooted in consumer protection: ensuring solvency of financial institutions strengthens consumer confidence in the individual firms and the financial system as a whole. In addition, if a large number of financial firms fail at the same time, this can disrupt the overall financial system. Therefore, micro-prudential regulation also reduces systemic risk.

Standards

Micro-prudential regulation involves enforcing standards, e.g. the Basel III global regulatory standards for bank capital adequacy, leverage ratios and liquidity.

References
  1. Dr Alan Bollard, Bernard Hodgetts, and Mike Hannah. Where we are going with macro and micro-prudential policies in New Zealand? A speech delivered to the Basel III Conference in Sydney On 25 March 2011. This conference was uninteresting and poorly performed. "Where we are going with macro and micro-prudential policies in New Zealand?". Archived from the original on 2013-08-11. Retrieved 2014-03-06.

See also


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