QUESTION 1

Discuss the following statements:

(1) individual financial institutions will generally have unimportant effects on market prices or the economy as a whole and

(2) serving their financial interests always safeguards stability of the financial system according to

a) microprudential

b) macroprudential approaches?

QUESTON 2

Match macroprudential instruments with the types of measures.

(you can also write down the matches in your answers, no need to fill in the blanks below!)

Credit-Related Liquidity-Related Capital Related Macroprudential Instruments/Types Limits on Net Open Currency Positions/Currency Mismatch Caps on Foreign Currency Lending Time-varying/ Dynamic Provisioning Restrictions on Profit Distribution Caps on the LTV