Calibrating the magnitude of the countercyclical capital buffer using market-based stress tests

Arbeitspapier

This paper proposes a novel methodology to calibrate the magnitude of the cap on the countercyclical capital buffer (CCyB) using market-based stress tests. The macroprudential authority in our paper aims to contain the possibility of a breach of a minimum capital ratio in the event of a severe system-wide shock within a certain permissible failure probability. To meet its objective during periods of challenging macro-financial conditions, the macroprudential authority requires banks to build up the CCyB during credit booms. We show how market-based stress tests can be used to estimate the necessary magnitude of the CCyB. We apply the methodology to major banks in six advanced economies. Our estimates suggest a magnitude of the cap on the CCyB in a range from 1.4 to 1.7 per cent of total assets, depending on the ability of the macro-prudential authority to forecast macrofinancial conditions.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Bank of Canada Staff Working Paper ; No. 2018-54

Klassifikation und Themen

• Klassifikation: Wirtschaft ; General Financial Markets: General (includes Measurement and Data) ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation
• Thema: Financial institutions ; Financial stability ; Financial system regulation and policies

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): van Oordt, Maarten R. C.
• Ereignis: Veröffentlichung
• (wer): Bank of Canada
• (wo): Ottawa
• (wann): 2018

Weitere Informationen

• DOI: doi:10.34989/swp-2018-54
• Handle: http://hdl.handle.net/10419/197907
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ