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The countercyclical capital buffer rate for covering the usual level of cyclical risks in the Czech Republic

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  • Miroslav Plasil

Abstract

This article sets out to present the principal features of the application of a non-zero countercyclical capital buffer rate when cyclical financial risks are their usual levels, and to summarise the main arguments for the macroprudential authority to apply such an approach. It goes on to present two methods for calibrating the non-zero rate for the Czech economy and to discuss the right timing for reaching that rate. Both methods imply a need to create a buffer rate of around 1% when cyclical risks are at their usual level. This rate should be reached within two years after the acute phase of a cyclical contraction or financial crisis has subsided.

Suggested Citation

  • Miroslav Plasil, 2019. "The countercyclical capital buffer rate for covering the usual level of cyclical risks in the Czech Republic," Occasional Publications - Chapters in Edited Volumes,, Czech National Bank.
    • Handle: RePEc:cnb:ocpubc:tafs2019/2
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    File URL: https://www.cnb.cz/export/sites/cnb/en/financial-stability/.galleries/thematic-articles-on-financial-stability/tafs_2019_02_en.pdf
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    References listed on IDEAS

    as
    1. Miroslav Plašil & Jakub Seidler & Petr Hlaváč, 2016. "A New Measure of the Financial Cycle: Application to the Czech Republic," Eastern European Economics, Taylor & Francis Journals, vol. 54(4), pages 296-318, July.
    2. repec:cnb:ocpubc:fsr1617/1 is not listed on IDEAS
    3. O'Brien, Eoin & O'Brien, Martin & Velasco, Sofia, 2018. "Measuring and mitigating cyclical systemic risk in Ireland: The application of the countercyclical capital buffer," Financial Stability Notes 4/FS/18, Central Bank of Ireland.
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