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Financial market pressure as an impediment to the usability of regulatory capital buffers

Author

Listed:
  • Andreeva, Desislava
  • Bochmann, Paul
  • Couaillier, Cyril

Abstract

This article discusses how market pressure can impede the usability of regulatory buffers. The capital relief measures in the euro area since the outbreak of the COVID-19 crisis had so far mixed effects on banks’ target CET1 ratio, suggesting an impeded pass-through. Market pressure can be a key explanatory factor, with pressure from credit and, critically, equity investors. JEL Classification: G01, G21, G28, C58

Suggested Citation

  • Andreeva, Desislava & Bochmann, Paul & Couaillier, Cyril, 2020. "Financial market pressure as an impediment to the usability of regulatory capital buffers," Macroprudential Bulletin, European Central Bank, vol. 11.
    • Handle: RePEc:ecb:ecbmbu:2020:0011:3
    Note: 2285252
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    File URL: https://www.ecb.europa.eu//pub/financial-stability/macroprudential-bulletin/html/ecb.mpbu202010_3~ece3267a72.en.html
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    Citations

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    Cited by:

    1. Benbouzid, Nadia & Kumar, Abhishek & Mallick, Sushanta K. & Sousa, Ricardo M. & Stojanovic, Aleksandar, 2022. "Bank credit risk and macro-prudential policies: Role of counter-cyclical capital buffer," Journal of Financial Stability, Elsevier, vol. 63(C).
    2. Lucas Avezum, 2023. "To use or not to use? Capital buffers and lending during a crisis," Working Papers w202308, Banco de Portugal, Economics and Research Department.
    3. Leitner, Georg & Dvořák, Michal & Magi, Alessandro & Zsámboki, Balázs, 2023. "How usable are capital buffers?," Occasional Paper Series 329, European Central Bank.
    4. Markus Eller & Reiner Martin & Lukas Vashold, 2021. "CESEE’s macroprudential policy response in the wake of the COVID-19 crisis," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1/21, pages 55-69.
    5. Franziska Bremus & Lukas Menkhoff, 2021. "Eigenkapitalpuffer im Abschwung wirksam? [Are Equity Buffers Effective During the Eonomic Downturn?]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 101(3), pages 207-212, March.

    More about this item

    Keywords

    bank ratings; capital buffers; capital target; macroprudential policy; market discipline; solvency-funding cost nexus;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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