MACRO-PRUDENTIAL

The QFC Regulatory Authority has developed and applied an effective framework for Macro-Prudential Supervision which supplements the traditional, firm-by-firm approach to supervision with a routine use of horizontal, or cross-firm, reviews to monitor industry practices across banking, insurance and asset management sectors as well as to identify common funding strategies, balance sheet developments, interconnectedness, and other factors with implications for systemic risk. Macro-Prudential supervision encompasses a set of proactive activities and tools carried out with the goal of identifying, assessing and monitoring risks to the financial system. These activities include the analysis of macro-economic and financial market information, and of how these data interact with each other. Macro-Prudential Supervision operates alongside Micro-Prudential (or entity-level) Supervision, in assisting supervisors in their efforts to prevent or mitigate the detrimental effects of the key risks identified on an on-going basis.

Macro-Prudential activities of the QFC Regulatory Authority endeavors to assist supervisors responsible for individual firms by:

  • identifying and assessing important changes in relevant financial sectors (i.e., banking, insurance and asset management) as well as macro-economic factors affecting these markets;

  • providing early warning signals of emerging risks, and enabling prompt action;

  • delivering value-added information for forward-looking monitoring; and

  • identifying global, regional and domestic macro-financial issues that may affect the banking, insurance and asset management sectors in the QFC.

Drawing on the work of industry practitioners and financial market experts globally, the QFC Regulatory Authority has increasingly applied enhanced quantitative and qualitative methods for evaluating the conditions of supervised firms as well as the risks they may pose to the broader financial system within the QFC. In pursuit of this objective and to promote a systemically stable financial system, the QFC Regulatory Authority develops quarterly snapshots of the status of the financial system within the QFC (i.e., Fact Sheets for banking, insurance and the asset management sector) and a comprehensive semi-annual Macro-Prudential report (i.e., the Macro-Prudential Review).  The findings of each report are shared with supervision teams across the QFC Regulatory Authority periodically but more importantly in a highly interactive and thought provoking manner in order to trigger debate as well as awareness of key developments and trends.