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A positive neutral rate for the countercyclical capital buffer – state of play in the banking union

Author

Listed:
  • Behn, Markus
  • Pereira, Ana
  • Pirovano, Mara
  • Testa, Alessandra

Abstract

This article discusses the possible implementation of a positive neutral rate for the countercyclical capital buffer (CCyB) as a means of increasing macroprudential policy space in the European banking union. Drawing on experience from the coronavirus (COVID-19) pandemic, it explains why a positive neutral rate is needed to enhance the effectiveness of the current macroprudential framework. It also describes recent progress on the application of this tool around the globe and concludes with some remarks on the calibration and potential future application of the tool in the banking union.

Suggested Citation

  • Behn, Markus & Pereira, Ana & Pirovano, Mara & Testa, Alessandra, 2023. "A positive neutral rate for the countercyclical capital buffer – state of play in the banking union," Macroprudential Bulletin, European Central Bank, vol. 21.
    • Handle: RePEc:ecb:ecbmbu:2023:0021:1
    Note: 2203070
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    File URL: https://www.ecb.europa.eu//pub/financial-stability/macroprudential-bulletin/html/ecb.mpbu202304_01~6eef01bb6a.en.html
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    Cited by:

    1. Behn, Markus & Forletta, Marco & Reghezza, Alessio, 2024. "Buying insurance at low economic cost – the effects of bank capital buffer increases since the pandemic," Working Paper Series 2951, European Central Bank.

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