Conducting Financial Stability Policy in Armenia
The practical implementation of Macroprudential policy assumes the following sequential steps:
- monitoring of the evolution of systemic and/or other risks in the financial system
- identifying the source of risk and measuring it
- choice of the appropriate intermediate objective and the appropriate tool to address the risk
- calibrating the tool
- communication of the decision to the financial market participants
- practical implementation of the tool
- retrospective assessment of the effectiveness of the tool and possible recalibration.
One of the most important steps in the above flowchart are the ones related to measurement of systemic risk and calibration of the chosen instrument. Quantitative measurement of the systemic risk heavily relies on the development and use of complex mathematical models, that try to timely capture the accumulation of risks in the financial system, as well as simpler early warning indicators. The final decision about the calibration of the instrument combines with the signals from models and expert judgements of the staff.
The CBA team continuously works on the improvement of existing tools aimed to capture the systemic risk, as well as developing new ones according to the best international practice and local needs.
Objectives and toolkit of Macro-prudential policy