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Anticipating changes in bank capital buffer requirements

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Listed:
  • Josef Schroth

Abstract

Time-varying capital buffer requirements are a powerful tool that allow bank regulators to avoid severe financial stress without the cost of imposing very high levels of capital. However, this tool is only effective if banks understand how it is used. I present a model that banks and financial market participants can use to anticipate how time-varying capital buffer requirements change over time.

Suggested Citation

  • Josef Schroth, 2025. "Anticipating changes in bank capital buffer requirements," Staff Analytical Notes 2025-27, Bank of Canada.
    • Handle: RePEc:bca:bocsan:25-27
    DOI: 10.34989/san-2025-27
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    References listed on IDEAS

    as
    1. Chen, David Xiao & Friedrich, Christian, 2023. "The countercyclical capital buffer and international bank lending: Evidence from Canada," Journal of International Money and Finance, Elsevier, vol. 139(C).
    2. Babić, Domagoj & Fahr, Stephan, 2019. "Shelter from the storm: recent countercyclical capital buffer (CCyB) decisions," Macroprudential Bulletin, European Central Bank, vol. 7.
    3. Schroth, Josef, 2021. "Macroprudential policy with capital buffers," Journal of Monetary Economics, Elsevier, vol. 118(C), pages 296-311.
    4. Josef Schroth, 2023. "Should Banks Be Worried About Dividend Restrictions?," Staff Working Papers 23-49, Bank of Canada.
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    Keywords

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    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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