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Financial stability committees and the countercyclical capital buffer

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  • Edge, Rochelle M.
  • Liang, Jean Nellie

Abstract

Multi-agency financial stability committees (FSCs) have grown dramatically since the global financial crisis. However, most cannot direct actions or recommend to other agencies that they take actions, and most would influence policy actions only through convening and discussing risks. We evaluate whether the significant variation in FSCs and other financial regulatory structures across countries affect decisions to use the countercyclical capital buffer (CCyB). After controlling for credit growth and the severity of the financial crisis, we find that countries with stronger FSCs are more likely to use the CCyB, especially relative to countries where a bank regulator or the central bank has the authority to set the CCyB. While the experience with the CCyB is still limited, these results are consistent with some countries creating FSCs with strong governance to take actions, but most countries instead creating weak FSCs without mechanisms to promote actions, consistent more with a symbolic political delegation motive and raising questions about accountability for financial stability.

Suggested Citation

  • Edge, Rochelle M. & Liang, Jean Nellie, 2020. "Financial stability committees and the countercyclical capital buffer," Discussion Papers 04/2020, Deutsche Bundesbank.
  • Handle: RePEc:zbw:bubdps:042020
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    References listed on IDEAS

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    Cited by:

    1. Kiemo, Samuel & Kamau, Anne & Rugiri, Irene W. & Talam, Camilla, 2021. "Macroprudential regulation and bank stability: The credit market signal," KBA Centre for Research on Financial Markets and Policy Working Paper Series 53, Kenya Bankers Association (KBA).
    2. 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.
    3. Lukas Menkhoff, 2022. "Der antizyklische Kapitalpuffer: Reformoptionen [Reform Options for the Countercyclical Capital Buffer]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 102(1), pages 59-63, January.

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    More about this item

    Keywords

    Financial stability committees; Bank regulators; Delegation; Macroprudential policy; Countercyclical capital buffer; Credit growth;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • 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
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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