How Do Regulators Set the Countercyclical Capital Buffer?

Bernhard Herz and Jochen Keller
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Jochen Keller: University of Bayreuth

International Journal of Central Banking, 2023, vol. 19, issue 3, 99-137

Abstract: As part of the Basel III regulatory framework, the macroprudential countercyclical capital buffer (CCyB) was introduced to mitigate the procyclicality in the financial system. National designated authorities are supposed to set the CCyB based on a “guided discretion” approach that combines rulebased and discretionary elements. We identify a CCyB puzzle, as we do not find the credit-to-GDP gap, the recommended rule-based component of the CCyB, to be crucial for buffer decisions. Instead, designated authorities appear to base their CCyB decisions in a systematic way on the discretionary elements of the framework, namely the development of house prices and non-performing loans. We also find national institutional frameworks to be relevant for CCyB policies.

JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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