Build up CCyB gradually over financial cycle, says ECB paper
Even partially built-up buffers help during a shock, researchers argue
Macro-prudential authorities should encourage banks to build up their counter-cyclical capital buffers (CCyB) over the financial cycle, preferably when banks are highly profitable, new research from the European Central (ECB) Bank shows.
A positive neutral CCyB creates more macro-prudential space, which can be useful after a financial shock. The paper says the Covid-19 pandemic made clear that such financial shocks “may occur at any stage of the financial cycle”. With climate change accelerating
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