Featured Product

    ECB Publishes Eighth Issue of the Macro-Prudential Bulletin

    September 16, 2019

    ECB published Issue 8 of the Macroprudential Bulletin, which provides insight into the ongoing work of ECB in the field of macro-prudential policy. ECB also published the statement of the Vice-President Luis de Guindos on the bulletin. This issue focuses on the development of the sectoral macro-prudential framework as well as on the impact of countercyclical capital requirements on bank lending and the broader economy. This bulletin includes three articles on key macro-prudential topics: the macroeconomic impact of changes in economic bank capital buffers, the importance of reciprocity arrangements for the use of sectoral capital buffers, and the specific features of the countercyclical capital buffer (CCyB) and its sectoral application (SCCyB).

    Specific features of CCyB and SCCyB. This article discusses the advantages and shortcomings of the sectoral application of CCyB for addressing sectoral systemic risks. The article explores and compares the effectiveness of the CCyB and SCCyB in enhancing banks’ resilience and curbing credit cycles, using a calibrated dynamic stochastic general equilibrium model for the euro area. Results show that if risks are confined to a particular credit sector, a SCCyB could prove more effective than the CCyB in strengthening bank resilience to the target sector and in mitigating sectoral credit imbalances.

    Importance of reciprocity arrangements for the use of sectoral capital buffers. This article explores the relevance of sectoral cross-border credit provided via foreign branches or direct cross-border lending in the Single Supervisory Mechanism (SSM) area. The cross-border recognition of these exposures through mandatory reciprocity arrangements may prove significant in an integrated financial system to level the playing field for domestic and foreign banks. This is important because financial services provided via foreign branches or direct cross-border exposures would otherwise not be subject to a macro-prudential measure taken in a host member state. The results of analysis support the introduction of mandatory reciprocity arrangements for sectoral capital buffers where exposures are material, in an effort to foster the effectiveness of macro-prudential policies.

    Macroeconomic impact of changes in economic bank capital buffers. This article estimates the impact of countercyclical bank capital requirements on bank lending and the economy. Due to the limited use of CCyB, estimations are based on target economic capital ratio, which is the capital ratio that a bank would like to hold considering its own characteristics and macroeconomic conditions. The assumption is that the effects of changes in target ratios are similar to the effects of changes in CCyB. Results show that a sudden decline in economic capital buffers, such as one arising from an increase in the target capital ratio, leads to a modest decline in output and prices and to a larger decline in bank lending growth, suggesting that countercyclical capital-based macro-prudential policy measures can be useful to dampen the financial cycle.

     

    Related Links

    Keywords: Europe, EU, Banking, Macroprudential Bulletin, CCyB, Macro-Prudential Policy, SCCyB, Capital Buffers, Sectoral CCyB, ECB

    Featured Experts
    Related Articles
    News

    BIS Examines Use of Big Data and Machine Learning at Central Banks

    BIS published a paper that provides an overview on the use of big data and machine learning in the central bank community.

    March 04, 2021 WebPage Regulatory News
    News

    APRA Finalizes Reporting Standard for Operational Risk Requirements

    APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.

    March 03, 2021 WebPage Regulatory News
    News

    ECB Publishes Guide for Determining Penalties for Regulatory Breaches

    ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.

    March 02, 2021 WebPage Regulatory News
    News

    MAS Sets Out Good Practices to Manage Operational Risks Amid COVID

    MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.

    March 02, 2021 WebPage Regulatory News
    News

    ACPR Announces New Data Collection Application for Banks and Insurers

    ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.

    March 02, 2021 WebPage Regulatory News
    News

    BCB Maintains CCyB at 0%, Initiates First Cycle of Regulatory Sandbox

    BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.

    March 02, 2021 WebPage Regulatory News
    News

    EIOPA Launches Study on Non-Life Underwriting Risk in Internal Models

    EIOPA has launched a European-wide comparative study on non-life underwriting risk in internal models, also kicking-off of the data collection phase.

    March 01, 2021 WebPage Regulatory News
    News

    SRB Publishes Overview of Resolution Tools Available in Banking Union

    SRB published an overview of the resolution tools available in the Banking Union and their impact on a bank’s ability to maintain continuity of access to financial market infrastructure services in resolution.

    March 01, 2021 WebPage Regulatory News
    News

    EBA Consults on Pillar 3 Disclosure Standards for ESG Risks Under CRR

    EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).

    March 01, 2021 WebPage Regulatory News
    News

    ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting

    ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting

    March 01, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6655