Regulatory Alerts2022-05-17
Capital review - What’s the use of the countercyclical capital buffer
The Reserve Bank of New Zealand evaluates the effectiveness of the countercyclical capital buffer (CCyB) compared to a static conservation buffer to inform macroprudential policy design. The analysis indicates that while a CCyB cut may modestly boost lending during post-crisis recovery, it is unlikely to affect bank capital ratios or lending during the crisis itself. Consequently, the document recommends complementing the CCyB with a robust conservation buffer, implementing dividend restrictions to prevent capital erosion, and maintaining conservative timing for buffer adjustments.
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