It stands for macroprudential and microprudential instruments; macroprudential instruments are those deployed and applied by a central bank with the ultimate objective of contributing to the safeguarding of the stability of the financial system as a whole (i.e., a macro level). This involves its role as to monitor, advise and mitigate the build-up of systemic risks, mainly as a result of excessive credit growth and leverage, excessive maturity mismatch and market liquidity, direct and indirect exposure concentrations, misaligned incentives with a focus on moral hazard reduction, and boosting the resilience of financial infrastructures.

Macroprudential instruments include the broad categories of capital-based measures, liquidity-based measures, borrower-based measures, among others. Within each category, there are certain subcategories such as capital requirements regulations (e.g., risk weights, capital conservative buffers, etc.) and directives (e.g., countercyclical capital buffers, systemic risk buffers), and specific financial ratios (e.g., leverage ratio), all within capital-based measures.

Similarly, a microprudential instrument is one that a regulatory authority deploys and applies in relation to a single regulated entity or market participant. For example, microprudential instruments may impose exposure limits to a single counterparty and certain liquidity ratios, such as the liquidity coverage ratio (LCR), that set a cap on concentration in specific instruments, e.g., wholesale funding, and promote the use of more liquid instruments.

Macroprudential instruments cannot be used without involving microprudential instruments, as the two classes of instruments complement each other.