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Calibrating the Positive Neutral and Overall CCyB: A Macroprudential Stress Testing Approach

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  • Ieva Mikaliūnaitė-Jouvanceau

    (Bank of Lithuania)

Abstract

The adoption of the positive neutral countercyclical capital buffer (PN CCyB) has increased across jurisdictions, yet quantitative calibration methodologies vary considerably and typically address either the PN CCyB or the overall CCyB separately. This paper proposes a unified calibration approach that addresses both using a macroprudential stress testing model. The approach simulates capital depletion under macroeconomic scenarios that feature different degrees of cyclical risk. By comparing capital depletion across these scenarios, it isolates incremental capital erosion attributable to cyclical developments. Applied to the Lithuanian banking sector across 23 sub-sample periods covering 2018Q4–2024Q2, the calibration indicates a PN CCyB in the range of 0.75–1.25 percent and an overall CCyB around 2 percent under elevated cyclical risk. The results are robust across alternative balance sheet dynamics and scenario severity assumptions.

Suggested Citation

  • Ieva Mikaliūnaitė-Jouvanceau, 2026. "Calibrating the Positive Neutral and Overall CCyB: A Macroprudential Stress Testing Approach," Bank of Lithuania Discussion Paper Series 46, Bank of Lithuania.
    • Handle: RePEc:lie:dpaper:46
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    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • 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

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