This applies to both the setting of official interest rates and the implementation of non-standard measures. This autumn, tensions in financial markets have intensified again with very adverse effects on financing conditions and confidence. Downside risks to the economic outlook have increased. The weaker degree of activity is moderating price, cost and wage pressures.
We are proposing that the top 1.5% of this 10% capital buffer consist of a ‘counter-cyclical capital buffer’, which would be removed in the event of a large economic stress so that banks could continue to lend to support the economy during this stress period (provided of course that the bank was fundamentally healthy).