Since 2008, many countries have strengthened their efforts to preserve financial stability, which is crucial to achieving sustainable and inclusive growth. In particular, countries have been developing a new emphasis on policies, known as macroprudential policies, which are designed to contain those risks that could undermine the stability of the financial system.

In this context, the International Monetary Fund (IMF) and the Central Bank of Uruguay co-hosted a high-level regional conference entitled “Macroprudential Policies to Achieve Financial Stability”, held in Punta del Este, Uruguay on March 1-2, 2012. The conference gathered central bankers, finance ministry officials, financial regulators and supervisors from Latin America, Korea, New Zealand, Spain, the United Kingdom and the United States to exchange views and to discuss how the Fund can help the region develop these policies through its Financial Sector Assessment Program (FSAP), technical assistance and its annual surveillance of macroeconomic stability.

“While this process is still generally at an early stage, many countries in Latin America already have had significant experience with these measures for some time,” IMF Deputy Managing Director Min Zhu said, pointing to the use of measures such as liquidity and reserve requirements and limits on foreign exchange positions. “So it is only natural that we discuss with the region how to improve these policies further,” he added.

José Viñals, Financial Counselor and Director of the IMF’s Monetary and Capital Markets Department, commented, “No institutional framework of macroprudential policy fits all countries alike, yet we have learned that the central bank should always play an important role for its unique expertise while also involving the ministry of finance in a careful manner.” Mr. Viñals added, and “that financial stability is a responsibility that should be shared by all policies, not just macroprudential but also macroeconomic.”

Nicolás Eyzaguirre, Director of the IMF`s Western Hemisphere Department, emphasized that “macroprudential policies constitute an important complement to traditional macroeconomic policies to manage the risk of boom-bust cycles.”

In discussing how the Fund can help countries develop policies to address systemic risks, participants commented that for quite some time the Fund has played a useful role in helping countries in the region to improve their macroeconomic policies and financial supervision. In particular, assessments of the financial system under the FSAP program helped set an agenda for technical assistance to help implement reforms. The annual surveillance process (Article IV) is crucial in ensuring a timely and comprehensive review of a country’s macroeconomic and macro-financial policies and identifying emerging risks.

Going forward, more frequent FSAP assessments would be useful to help advance financial sector reforms, especially in the area of macroprudential policy. It would be important to ensure better integration of financial sector and macroeconomic analysis and to continue to tailor the advice to individual country circumstances. Participants also noted that the Fund could leverage its understanding and analysis of policies in all its member countries to provide focused research and analysis on many of the questions that still need to be answered to address this new policy agenda.

The President of the Central Bank of Uruguay, Mario Bergara, noted the importance of developing this type of event to analyze macroprudential policies to preserve financial stability. "The central bank is committed to exchange views and technical cooperation to discuss such crucial issues and make a contribution to finding new approaches to ensure financial system stability."

Mr. Bergara said that, in the case of Uruguay, financial stability within a context of macroeconomic stability includes coordination and coherence between fiscal policy, monetary policy and macro and micro prudential regulation. "Uruguay combines micro and macro prudential perspective on financial regulation, mitigating potential systemic risks and representing the uninformed agents," said Mr. Bergara.