The global financial crisis demonstrated that a micro-prudential supervision approach is not sufficient to guarantee financial stability. Therefore, complementing bank supervision on an individual basis and consolidated group level, a macroprudential supervision approach is being implemented to ensure that appropriate measures are taken in case of growing cyclical (e.g. excessive lending growth) or structural (e.g. related to systemically important (too big to fail) credit institutions) systemic risks. In such cases, appropriate instruments may be applied, such as setting the capital buffer rates, increased minimum capital and liquidity requirements, more stringent risk exposure limits etc.
In Latvia, the Bank of Latvia is a macroprudential supervision authority. Whereas, according to the Credit Institution Law, the Financial and Capital Market Commission (FCMC) is the authority responsible for applying the macroprudential tools. The Bank of Latvia, the Ministry of Finance and the FCMC have entered into a cooperation agreement on promoting financial stability, and the Macroprudential Council was established in 2013. The Governor of the Bank of Latvia presides over the meetings of the Macroprudential Council with participation of the finance minister and FCMC chairman.