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Indicators for Setting the Countercyclical Capital Buffer

Author

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  • Creedon, Conn

    (Central Bank of Ireland)

  • O'Brien, Eoin

    (Central Bank of Ireland)

Abstract

Since January 1 2016, the Countercyclical Capital Buffer (CCB), a new macro-prudential policy instrument, has been operational in Ireland. The CCB, which is a time-varying countercyclical capital requirement, aims to limit the potential systemic risks associated with excessive credit growth. This Letter provides an overview of the CCB and summarises European Systemic Risk Board (ESRB) recommendations on appropriate economic and financial indicator variables to guide the setting of the CCB. A number of indicators are applied to historical Irish data for illustrative purposes. The analysis also highlights challenges that arise in the estimation and interpretation of indicators and, therefore, the importance that policymaker judgement will play in setting the CCB rate.

Suggested Citation

  • Creedon, Conn & O'Brien, Eoin, 2016. "Indicators for Setting the Countercyclical Capital Buffer," Economic Letters 02/EL/16, Central Bank of Ireland.
    • Handle: RePEc:cbi:ecolet:02/el/16
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    File URL: https://centralbank.ie/docs/default-source/publications/economic-letters/economic-letter---vol-2016-no-2.pdf?sfvrsn=14
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    References listed on IDEAS

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    1. Cussen, Mary & O'Leary, Brídín, 2013. "Why are Irish Non-Financial Corporations so Indebted?," Quarterly Bulletin Articles, Central Bank of Ireland, pages 104-118, January.
    2. Robert Kelly & Kieran Mcquinn & Rebecca Stuart, 2011. "Exploring the Steady-State Relationship Between Credit and GDP for a Small Open Economy–The Case Of Ireland," The Economic and Social Review, Economic and Social Studies, vol. 42(4), pages 455-477.
    3. Cussen, Mary, 2015. "New Insights from the Enhancements to Quarterly Financial Accounts," Quarterly Bulletin Articles, Central Bank of Ireland, pages 91-101, April.
    4. Bermingham, Colin, 2006. "An Examination of Data Revisions in the Quarterly National Accounts," Research Technical Papers 10/RT/06, Central Bank of Ireland.
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    Cited by:

    1. Zulkhibri, Muhamed & Sakti, Muhammad Rizky Prima, 2017. "Macroprudential Policy and Financing Behaviour in Dual Banking System: Bank-Level Evidence from Indonesia," Working Papers 2017-5, The Islamic Research and Teaching Institute (IRTI).

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