The extent to which this happens hinges on a large number of factors – for example, on how far the capital buffers exceed the regulatory minimum, on the willingness of the banks to expand or contract these buffers, and, naturally enough, on the use of alternatives, such as raising additional capital.
In addition, the potential antidotes to procyclicality have not yet been researched and tested in detail. This relates to components in the regulatory framework that dampen procyclicality, or even automatic stabilisers, which have an anticyclical effect and which are now being built into Basel II. For example, long-term averages are now to be used for the probabilities of default.