On Nov. 28, Basel issued report on positive neutral CCyB.
Basel published a range of practices report on implementing a positive neutral CCyB.
An increasing number of jurisdictions have voluntarily chosen to introduce a positive neutral CCyB when risks are neither subdued nor elevated, and report considers the different jurisdictional frameworks for implementing a positive neutral CCyB.
Background
In 2010, Basel issued guidance detailing key requirements for operating the CCyB.
In 2017 it published a paper discussing the range of practices in implementing the CCyB, which examined how jurisdictions have used the flexibility in CCyB framework.
An increasing number of jurisdictions have chosen to use flexibility to introduce a positive neutral CCyB when risks are judged to be neither subdued nor elevated.
In 2022, Basel published a newsletter in which it supported and acknowledged the benefits of authorities' ability to set positive neutral rate for the CCyB (see #150083).
Report
This report builds on the prior publications by examining observed range of practices adopted by jurisdictions which have chosen to implement a positive neutral CCyB.
Considers different jurisdictional frameworks for implementing a positive neutral CCyB.
Describes approaches to calibration and operation of buffer, and discusses reciprocity.
Authorities that have introduced a positive neutral CCyB have found it helpful for banks in their jurisdictions to have buffers of capital in place that can be released in the event of sudden shocks, including those unrelated to the credit cycle, such as the pandemic.
The adoption of a positive neutral CCyB approach is not required by Committee members, and the report does not seek to discuss or opine on the merits or demerits of a positive neutral CCyB relative to other macroprudential measures or tools.
Some jurisdictions may use tools other than the positive neutral CCyB to address similar risks, based on their specific jurisdictional circumstances.
