Anchoring Countercyclical Capital Buffers: The role of Credit Aggregates
Mathias Drehmann (),
Claudio Borio () and
Kostas Tsatsaronis ()
International Journal of Central Banking, 2011, vol. 7, issue 4, 189-240
We investigate the performance of different variables as anchors for setting the level of the countercyclical regulatory capital buffer requirements for banks. The gap between the ratio of credit to GDP and its long-term backward-looking trend performs best as an indicator for the accumulation of capital, because this variable captures the build-up of systemwide vulnerabilities that typically lead to banking crises. Other indicators, such as credit spreads, are better at indicating the release phase, as they are contemporaneous signals of banking sector distress that can precede a credit crunch.
JEL-codes: E44 E61 G21 (search for similar items in EconPapers)
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Working Paper: Anchoring countercyclical capital buffers: the role of credit aggregates (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2011:q:4:a:8
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