Calibrating the Positive Neutral and Overall CCyB: A Macroprudential Stress Testing Approach

Ieva Mikaliūnaitė-Jouvanceau ()
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Ieva Mikaliūnaitė-Jouvanceau: Bank of Lithuania

No 46, Bank of Lithuania Discussion Paper Series from Bank of Lithuania

Abstract: The adoption of the positive neutral countercyclical capital buffer (PN CCyB) has increased across jurisdictions, yet quantitative calibration methodologies vary considerably and typically address either the PN CCyB or the overall CCyB separately. This paper proposes a unified calibration approach that addresses both using a macroprudential stress testing model. The approach simulates capital depletion under macroeconomic scenarios that feature different degrees of cyclical risk. By comparing capital depletion across these scenarios, it isolates incremental capital erosion attributable to cyclical developments. Applied to the Lithuanian banking sector across 23 sub-sample periods covering 2018Q4–2024Q2, the calibration indicates a PN CCyB in the range of 0.75–1.25 percent and an overall CCyB around 2 percent under elevated cyclical risk. The results are robust across alternative balance sheet dynamics and scenario severity assumptions.

Keywords: Countercyclical Capital Buffer; Macroprudential Policy; Stress Testing; Bank Capital; Systemic Risk (search for similar items in EconPapers)
JEL-codes: E58 G21 G28 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2026-07-01
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