Thinking beyond borders: how important are reciprocity arrangements for the use of sectoral capital buffers?

David Cantone, Nadya Wildmann and Elena Rancoita

Macroprudential Bulletin, 2019, vol. 8

Abstract: The expansion of the EU macroprudential toolkit to also include capital buffers applied at sectoral level may require the cross-border recognition of these instruments. This article explores the relevance of sectoral cross-border credit provided via foreign branches or direct cross-border lending in the SSM area and analyses the effects of the implementation of mandatory reciprocity arrangements. Our findings provide some evidence supporting the introduction of mandatory reciprocity arrangements for sectoral capital buffers where exposures are material in order to ensure a level playing field and pre-empt future leakages. This is important to foster the effectiveness of macroprudential policies because financial services provided via foreign branches or direct cross-border exposures would otherwise not be subject to a macroprudential measure taken in a host Member State. JEL Classification: C68, E58, G21, G28

Keywords: macroprudential regulatory framework; sectoral capital buffers; sectoral systemic risks (search for similar items in EconPapers)
Date: 2019-09
Note: 3455035
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbmbu:2019:0008:2

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