Macroprudential policies aim to maintain financial stability by increasing the resilience of the financial system (together with the microprudental framework) and containing the accumulation of systemic risks.
Standard macroprudential instruments (such as capital add-ons on specific exposures) may not always contribute to these objectives when deployed to address the systemic implications of climate-related financial risks, as they could exacerbate transition risks.
In order to mitigate these potential side effects, authorities need to carefully define the scope of application of such macroprudential policies.
While overcoming these challenges is an operationally complex task, failure to do so may render such macroprudential policies ineffective and potentially counterproductive for financial stability.
