Arbeitspapier
Indicators used in setting the countercyclical capital buffer
According to EU legislation, the national authorities should use the principle of 'guided discretion' in setting the countercyclical capital buffer (CCB), which increases banks' resilience against systemic risk associated with periods of excessive credit growth. This means that the decision should be based on signals from a pre-determined set of early warning indicators, but that there should also be room for discretion, as there is always uncertainty associated with the use of early warning indicators. The European Systemic Risk Board (ESRB) recommends that the authorities use the deviation of the credit-to-GDP ratio from its long term trend value (credit-to-GDP gap) as the primary indicator in setting the CCB. In addition, designated authorities should use in their decision making indicators that measure private sector credit developments and debt burden, overvaluation of property prices, external imbalances, mispricing of risk, and strength of bank balance sheets. Based on an empirical analysis of data on EU countries and a large assortment of potential indicators, we propose a set of suitable early warning indicators for each of these categories.
- ISBN
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978-952-323-035-4
- Language
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Englisch
- Bibliographic citation
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Series: Bank of Finland Research Discussion Papers ; No. 8/2015
- Classification
-
Wirtschaft
Financial Crises
Financial Institutions and Services: Government Policy and Regulation
- Event
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Geistige Schöpfung
- (who)
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Kalatie, Simo
Laakkonen, Helinä
Tölö, Eero
- Event
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Veröffentlichung
- (who)
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Bank of Finland
- (where)
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Helsinki
- (when)
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2015
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Kalatie, Simo
- Laakkonen, Helinä
- Tölö, Eero
- Bank of Finland
Time of origin
- 2015
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