From risk to buffer: Calibrating the positive neutral CCyB rate

Luis Herrera, Mara Pirovano and Valerio Scalone
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Luis Herrera: BANCO DE ESPAÑA
Mara Pirovano: EUROPEAN CENTRAL BANK
Valerio Scalone: EUROPEAN CENTRAL BANK

No 2544, Working Papers from Banco de España

Abstract: This paper introduces the Risk-to-Buffer approach for calibrating the countercyclical capital buffer (CCyB), with a particular emphasis on the positive neutral (PN) CCyB rate, tailored to the euro area. The proposed methodology is applied in both a dynamic stochastic general equilibrium (DSGE) framework and a macroeconomic time series setting. It estimates the amplification of adverse shocks under varying levels of cyclical systemic risk and calibrates the CCyB to counteract these amplification effects. Using data from 2009 to 2023, the analysis suggests a positive neutral CCyB rate for the euro area ranging between 1% and 1.5%. The findings indicate that output and inflation shocks, which are not directly linked to the materialization of domestic systemic risk, and high degrees of trade openness, warrant a more prominent role of the PN CCyB in the overall CCyB calibration. The exercise to illustrate the methodology is carried out for the euro area. While national calibrations require additional exercises, this approach offers a flexible and complementary framework that can support and enhance national-level analyses.

Keywords: financial stability; macroprudential policy; capital requirements; countercyclical capital buffer (search for similar items in EconPapers)
JEL-codes: C32 E51 E58 G01 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2025-11
New Economics Papers: this item is included in nep-dge, nep-eec and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2544

DOI: 10.53479/41506

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