Economic Commentary: Countercyclical capital buffers - a calculation method

Date 03/05/2013

Economic Commentary No. 2, 2013

 

To ensure that the banking sector has enough capital to support the real sector, even during times of stress, it may be efficient to vary the capital requirements over time. With a help of the countercyclical capital buffer, authorities can increase the capitalisation of the banking sector in good times, when risks may be building up. The capital thus accumulated could then be used to absorb losses in stressed times, bolstering confidence in the banking sector and supporting banks' services to the real sector.

 

To ensure international consistency and transparency, the Basel Committee on Banking Supervision has worked out a method to serve as a common starting point in setting countercyclical buffer rates. In this Commentary, the author illustrates how this method could be applied in Sweden.

 

Read the whole Economic Commentary.