On a personal note - ESRB

Over the past 4.5 years I have been a member of the Advisory Scientific Committee (ASC) of the ESRB.  Starting this month, I will be a co-chair for the next four years, together with Loriana Pelizzon and Steve Cecchetti. The actual chair(wo)manship is rotating, with each of us taking the lead for 16 months. In addition to co-chairing the ASC, this also involves participating and voting in ESRB General Board meetings. Unlike other European institutions, the ‘academic’ branch of the ESRB has three votes in the General Board (thus as much as three countries).

What is the ESRB? It was established at the end of 2010 as part of a wider reform aiming to improve financial supervision in the EU and brings together EU central banks and supervisors, the European Commission, and the European Supervisory Authorities (ESAs). It aims to identify and mitigate risks to the stability of the EU financial system that could damage the real economy. It may issue warnings and recommendations on how to mitigate those risks, thus relying on soft law rather than hard enforcement (the recommendation on dividend restrictions during Covid-19 is a classic example).

The Advisory Scientific Committee (ASC) is made up of 15 academically oriented independent experts from across the globe. In addition to providing input to the General Board (together with the Advisory Technical Committee), it produces its own reports and insights, including some quite prominent and influential ones, such as on overbanking in Europe, and transition to a low-carbon economy and systemic risks, but also contributes prominently to ESRB reports such as on safe assets in the euro area and macroprudential implications of a low-interest rate environment.  

While some might see the ESRB as a macroprudential authority without teeth, it is also Europe at its best. In the absence of clear macroprudential regulatory and supervisory responsibilities on the supranational level, it forces authorities across the EU to share their views and come to joint conclusions on financial stability risks.  The involvement of academics is rather unique but also reflects the increasing importance of a close dialogue between policy world and academia.