This approach would have three significant benefits as compared to the CCyB option: greater simplicity, transparency, and predictability. Raising the fixed floor would be simpler to execute than the CCyB proposal because raising the floor once and for all times would not require the Board to make complex, real-time decisions about how to adapt the regulatory framework to the evolving vulnerabilities to the economy.
Raising the fixed floor also would be more transparent and predictable for the public and the industry because a firm’s capital requirement would vary less over time. There are drawbacks to the higher fixed floor option, of course.