Rethinking the CCyB
As central banks rush to replenish bank capital reserves, the countercyclical buffer may need some fine-tuning
The move by several central banks in Europe to raise bank capital requirements under the countercyclical buffer (CCyB), just as the continent appears to be sliding into recession, has surprised many. But it may also suggest a more sophisticated understanding of the way in which the Basel Capital Accord instrument should be used.
“The Covid-19 experience really brought home the fact that buffers may be needed even if there hasn’t been much of a cyclical build-up of credit relative to GDP, so
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